Members of the New Firefighters' Pension Scheme 2006 (NFPS) are generally entitled to take a transfer value to another pension arrangement. Where the new pension scheme is another scheme that participates in the Public Sector Transfer Club, the transfer will normally be affected on Club terms.
The Public Sector Transfer Club Memorandum by the Cabinet Office (referred to as the Club Memorandum) sets out how pension credits and the Club transfer out payment should be calculated. This note should be used in combination with the approach set out in the Club Memorandum.
The New Firefighters' Pension Scheme Regulations 2006 define the circumstances under which a member is entitled to take a transfer value. Members with over three months of qualifying service would generally be entitled to a transfer value. Members with less than three months of qualifying service would normally be entitled to a refund of contributions.
The relevant date for calculating a transfer value is the "guarantee date" as defined in The Occupational Pensions Schemes (Transfer Values) Regulations 1996, i.e. it must be within 3 months (or exceptionally 6 months) of the date of the member's application.
The benefits to be valued for serving firefighters are those that would be payable if the member had left service on the date of the calculation.
The benefits to be valued for a deferred member should include revaluation to the guarantee date. The accrued pension benefits should be calculated at the last day of service, and then increased in line with Pensions Increase (Review) Orders to the guarantee date.
The factor for the survivor's pension does not depend on whether or not the member has a partner who would qualify for a survivor's pension in the event of the member's death.
The Club Memorandum states that a club transfer should be calculated in two parts for a member who has both a final salary pension (linked to salary and service) and additional pension, such that
- The final salary element is calculated on club terms; and
- The additional pension element is calculated on non-club terms
The Long Service Increment (LSI) and Continual Professional Development (CPD) elements of the NFPS are both classed as additional pension in the context of the Club Memorandum as they provide benefits that are unrelated to the salary and service of the member.
The formula to calculate the Club transfer is set out below. The paragraphs below provide the formula for Standard members and Specials members.
For Standard members entitled to deferred benefits from age 65 the transfer value should be calculated using the following formulas.
Club element
Calculated in line with the Club Memorandum using factors from Table 3 of the Club Memorandum.
Non-Club element
APBpen x GP + APBSUR x GSUR
Where:
APBpen - additional pension from CPD contributions or LSI
APBSUR - additional pension payable on the death of the member to their spouse or partner from CPD contributions or LSI
GP - Non-Club factor for member's pension - from Table 203, 204 or 205
GSUR- Non-Club factor for survivor's pension - from Table 203, 204 or 205
For Special members entitled to deferred benefits from age 60 the transfer value should be calculated using the following formula.
Club element
Calculated in line with the Club Memorandum using factors from Table 2 of the Club memorandum.
Non-club element
APBpen x GP + APBSUR x GSUR
Where:
APBpen - additional pension from CPD contributions or LSI
APBSUR - additional pension payable on the death of the member to their spouse or partner from CPD contributions or LSI
GP - Non-Club factor for member's pension - from Table 206 or 207
GSUR - Non-Club factor for survivor's pension - from Table 206 or 207
Adjustment for market conditions (AMC) factors no longer apply to Club transfers from 1 January 2012; however, some schemes may find it easier to retain an AMC table but based on factors of 1.00 for all yields and ages. Similarly, Club transfers that were calculated before 1 March 2017 were adjusted to take account of Guaranteed Minimum Pensions (GMPs) and National Insurance (NI) modification. The tables of factors effective from that date no longer include any factors for GMP or National Insurance modification adjustments. As with the AMC factors, some schemes may find it easier to retain GMP and National Insurance modification factors, in which the factor will be 0.00 in all cases.
The transfer value should be calculated in two stages. First, a gross transfer value should be calculated ignoring the pension debit. Second, the value of the pension debit should be calculated (i.e. the transfer value of a deferred pension of the same amount as the debit). The results of both calculations should be passed to the receiving scheme. The transfer value paid is the net amount: the gross transfer value less the value of the pension debit.
In some circumstances a statutory CETV (non-Club) transfer may produce a higher service credit for the member in the receiving scheme than a Club transfer. On responding to a request for a Club transfer value, the fire pension administrator should suggest to the administrator of the receiving scheme that they alert the member to the possibility that the statutory CETV route could, in some circumstances, result in a higher service credit. It would then be for the member to consider acting on the information by requesting a statutory CETV quotation from NFPS. Such cases are expected to be infrequent and are most likely to arise when an individual has taken a large drop in salary when moving.
A member is entitled to a split pension if, on changing role they have suffered a reduction in pay, or for those who stay in the same role but become entitled to a different rate of pay which impacts adversely on pensionable pay at the point of retirement from active service.
In this case, two pension calculations should be carried out, the first allowing for a split award and the payment of two pensions and the second as a single award. The greater of the two pension values should be used in the calculation of the transfer value.
