Factors Guidance Hub

The first stage will be to provide the member with a calculation of the cash equivalent of their entitlements in the scheme, at the date of the calculation (or other date specified by the Court, if applicable).

Members already in receipt of benefits do not have an entitlement to a cash equivalent transfer value. The pensioner cash equivalent value can be calculated using the method in this note but should be used for divorce purposes only.

There are two sets of tables:

Table F1 and F2 (Tables 301 and 302 in the consolidated factors spreadsheet): Pensioners who retired on ordinary grounds
Table G1 and G2 (Tables 303 and 304 in the consolidated factors spreadsheet): Pensioners who retired on ill health grounds

The main difference between Table F1/F2 and Table G1/G2 is that Table G1/G2 allows for the heavier mortality experienced on average by those who retire due to ill health.

Table G1/G2 should only be used for ill health pensioners under the age of 55 where full pension increases are payable in the period up to age 55. If pension increases are not payable before age 55 then the case should be referred to the Welsh Government.

Adjustment for market conditions (AMC) are no longer required for pensioner cash equivalents. The administrators can continue to use AMCs with all of the values set to 1.00, if it is required to aid administration.

The pensioner cash equivalent should be calculated as follows:

Cash equivalent = (CP x F_p) + (ACC PI x F_PI) + (SUR x F_sur) - (NI x F_ni) - (PRE GMP + G_post88 x POST GMP) x F_gmp

Where:

CP = current member's pension, see the Pension benefits section

ACC PI = member's accrued Pensions Increase (P.I.) if under 55, see the Pension benefits section

SUR = pension payable on the death of the member to their partner, see the Pension benefits section

NI = annual amount that will be deducted at State Pension age due to National Insurance (NI) modification (if any), see the Pension benefits and National Insurance modification sections

PRE GMP = annual GMP accrued before 6 April 1988, including revaluation to the calculation date, see the Guaranteed Minimum Pension section (for members who reached SPA before 6 April 2016) or zero (for members who reached SPA on or after 6 April 2016)

POST GMP = annual GMP accrued after 6 April 1988, including revaluation to the calculation date, see the Guaranteed Minimum Pension section (for members who reached SPA before 6 April 2016) or zero (for members who reached SPA on or after 6 April 2016)

F_p = factor for member's pension - Table F1 or F2

F_sur = factor for survivor's pension - Table F1 or F2

F_ni = factor for NI modification - Table F1 or F2

F_gmp = factor for GMP saving - Table F1 or F2

G_post88 = conversion factor applied to GMP deduction, for GMP amount in respect of service after 5 April 1988. When calculating the saving for GMP, the factor given should be applied to the sum of the GMP amount in respect of service up to 5 April 1988 and 15% of the GMP amount in respect of service after that date.

F_PI = factor for accrued P.I. if under 55 - Table F1 or F2

The pensioner cash equivalent should be calculated as follows:

Cash equivalent = (CP x F_p) + (SUR x F_sur) - (NI x F_ni) - (PRE GMP + G_post88 x POST GMP) x F_gmp

Where:

CP = current member's pension, see the Pension benefits section

SUR = pension payable on the death of the member to their partner, see the Pension benefits section

NI = annual amount that will be deducted at State Pension age due to NI modification, see the Pension benefits and National Insurance modification sections

F_p = factor for member's pension - Table G1 or G2

F_sur = factor for survivor's pension - Table G1 or G2

F_ni = factor for NI modification - Table G1 or G2

F_gmp = factor for GMP saving - Table G1 or G2

Factors should be selected depending on whether a member retired in ill-health or not and with reference to their sex and age last birthday at the calculation date.

The factors in the normal health tables run from age 50. Divorce cases where the member is under 50 and in receipt of benefits other than an ill health pension should be referred to GAD.

Separate cash equivalents should be calculated and quoted in respect of a member's benefits in the 1992 scheme, NFPS or 2015 sections.

The member's pension (CP) should be the rate of pension in payment at the calculation date. The survivor's pension (SUR) should be the rate payable if the member had died immediately before the calculation date. The last pension increase should be that awarded up to and including the April increase immediately before the calculation date. The member's accrued P.I. (ACC PI) only applies to members under the age of 55. It is the sum of the pension increases that would have been paid if the pensioner had been over 55.

If the member is over State Pension age and has a National Insurance modification, the pension used should be that after the deduction of the modification. In such cases, the NI factor (F_ni) should be set to zero.

This means that the calculation for pensioners who retired on ordinary grounds simplifies to:

Cash equivalent ordinary = (CP x F_p) + (ACC PI x F_PI) + (SUR x F_sur) - (PRE GMP + G_post88 x POST GMP) x F_gmp

The calculation for pensioners who retired on ill health grounds also simplifies to:

Cash equivalent ill health = (CP x F_p) + (SUR x F_sur) - (PRE GMP + G_post88 x POST GMP) x F_gmp

If the member's pension is reduced due to abatement or suspension due to reemployment, then the abatement reduction should be ignored for the purpose of this calculation. Benefits should be calculated as though the member had ceased reemployment on the date of calculation, and valued accordingly.

For members who reached State Pension age before 6 April 2016, the cash equivalent must be adjusted to reflect increases on the Guaranteed Minimum Pension (GMP) that are the responsibility of the State. The State is generally responsible for all the increases on the pre April 1988 GMPs, and increases above 3% per annum on the post April 1988 GMPs. Separate pre and post 1988 GMP figures need to be used.

Where the member has passed GMP Payment Age, the pre and post 1988 GMP amounts to use are the current annual amounts of GMP in payment. If the member has passed GMP Payment Age, and their GMP is not yet in payment, then the case should be referred to GAD.

Where needed, annual GMP figures can be obtained by multiplying the weekly GMP figures by 52. The sum of the GMP in respect of service up to 5 April 1988 and 15% of the GMP in respect of service after that date should be multiplied by the appropriate factor in the tables and the resulting figure used in the cash equivalent calculation.

Previously, an adjustment may have been needed for National Insurance modification where a member was under State Pension age. As with the AMC factors, some schemes may find it easier to retain National Insurance modification factors, in which case the factor will be 0.00 in all cases.

The amount of National Insurance modification (if any) should be expressed as an annual rate, and increased in line with the pension increases awarded between leaving and the April prior to the date of calculation inclusive. The relevant factor should be applied to that amount.