Members that continue to work after their NPA will have their benefits increased for late payment. This is done by an 'age addition' that is added to the member's account on each scheme anniversary (1 April) after the member reaches their NPA and is still in service, apart from in the scheme year when the account is established and the scheme year immediately following that. An 'assumed age addition' is added to the member's account on the date that they retire or leave service, if the date they retired or left service was after NPA.

Age addition factors only apply to members who remain in active service after NPA. Members who retire after NPA from deferred status should receive a late payment supplement, not an age addition, in respect of the period of deferment after NPA. Members who leave active service after NPA and then further delay retirement will receive an age addition in respect of service up to the date that they leave active service and a late payment supplement for the period of deferment after leaving active service.

There is separate guidance relating to the application of Late Payment Supplement factors.

In order to calculate the appropriate age addition for a scheme year, a percentage is applied to the 'opening balance' of the accrued pension for the previous scheme year.

For example, to calculate an age addition to be applied on 1 April 2025, a percentage is applied to the 'opening balance' of pension for the year 2024-25, not the opening balance for the year 2025-26. The opening balance for 2024-25 can be thought of as the balance at 31 March 2024.

We understand that the opening balance on a given scheme anniversary includes the opening balance at the previous scheme anniversary, indexation on the opening balance (at the previous scheme anniversary), earned pension applicable over the previous scheme year and any age addition awarded at the start of the previous scheme year.

The age addition is added to the member's account on the scheme anniversary but after the indexation has been determined on the opening balance for that year. So at 1 April 2025 the indexation on the opening balance at that date is determined firstand added to the account and then the age addition amount (based on the opening balance for the previous scheme year) is added.

The age addition percentage applicable to the member's relevant opening balance is derived from unisex factors. Factors are taken from tables AA65A to AA68A in Factor Tables.

For the member's first age addition after passing NPA, the appropriate factors are based on the member's age at the first scheme anniversary after NPA and the member's NPA.

The percentage used to calculate the first age addition is derived as:

Age addition percentage = (Factor at age at first scheme anniversary after NPA / Factor at age at NPA) - 1

Where:

Age addition percentage is applied to the opening balance (of the relevant accrued pension) for the previous scheme year.

Factors are taken from Tables AA65A to AA68A and the member's age is that at the relevant date in complete years and months with part months ignored.

For subsequent age additions the appropriate factors are based on the member's age at current scheme anniversary and the member's age at previous scheme anniversary.

The percentage used to calculate subsequent age additions is derived as:

Age addition percentage = (Factor at age at current scheme anniversary / Factor at age at previous scheme anniversary) - 1

Where:

Age addition percentage is applied to the opening balance (of the relevant accrued pension) for the previous scheme year.

Factors are taken from Tables AA65A to AA68A and the member's age is that at the relevant date in complete years and months with part months ignored.

Where a member who is over their NPA leaves active service part way through a scheme year (either to become a deferred member or to retire) then an assumed age addition is added to the member's account at retirement/leaving date to reflect the period between the previous scheme anniversary and date of leaving/retirement. There will also be an assumed age addition if a member passes NPA and at a later date within the same scheme year leaves or retires.

The assumed age addition is calculated similarly to the age addition described above, except that the appropriate factors are based on the member's age at deferment or retirement and the greater of member's NPA or age at previous scheme anniversary.

The percentage used to calculate the assumed age addition is derived as:

Assumed age addition percentage = (Factor at age at date of leaving/retirement / Factor at age at previous scheme anniversary or NPA if later) - 1

Where:

Assumed age addition percentage is applied to the opening balance (of the relevant accrued pension) for the current scheme year (i.e. this is the same opening balance as would have been used had the member remained in service until the next 1 April).

Factors are taken from Tables AA65A to AA68A and the member's age is that at the relevant date in complete years and months with part months ignored.

Our understanding is that a member who leaves active service after NPA but does not retire immediately can receive age addition in respect of service up to leaving active service and also a late payment supplement in respect of the period from their leaving date to their eventual retirement date.

The following points should be noted:

1. Age additions and assumed age additions are calculated before the commutation option is exercised.
2. The age additions and assumed age additions applied to the member's pension should also apply to the contingent partner's pension (where one is payable).

The following table sets out more detail of the calculation of the age addition and assumed age addition, including the treatment of the year in which the member attains NPA and the year of retirement and how the age addition calculation should be done where it covers a period in which factors are updated. It shows the calculation method for a member reaching their NPA of 66 years on 1 September 2021 before retiring during 2023-24 at age 67 years, 11 months and takes account of the introduction of new factors in 2023-24.

Our understanding is that Pension Credit pensions should not receive any increase on late retirement.

Pension Debit pensions should be treated in the same way as a deferred member's pension. Therefore, on late retirement they should be increased by a late payment supplement, not an age addition.