These factors are used to increase the benefits of deferred members who retire after their NPA. An LPS will also be awarded in cases where members leave service on or after NPA and then delay claiming a pension. The process for calculating the LPS is slightly different depending on whether the member left active service before or after NPA, as described in Stages 1 and 2 below.
The LPS is determined by applying the appropriate LPS factors to the pension at the point of retirement, where the pension includes any inflation increases awarded between the date that the member left service and the date at which they retire.
Where a member was in active service after NPA, the pension at NPA should have age addition and assumed age addition uplifts applied as appropriate for the period between NPA and date of leaving active service. If a member then subsequently defers taking their pension after leaving NPA and active service, a further LPS uplift should be applied in respect of the period the member was in not pensionable service between date of leaving (after NPA) and retirement.
The tables to use will be based on the member's NPA. For example:
- a member with an NPA of 67 will use the NPA 67 tables (i.e., table LP67A).
- a member with an NPA of 67 years and 2 months will use the NPA 67 and NPA 68 tables (i.e., tables LP67A and LP68A), with the factors interpolated for NPA 67 years 2 months.
The formulae below set out the two stage process for calculating the LPS.
Stage 1 - Calculate the LPS factor for the normal pension age
LPSNPA percentage = (Factor at late retirement age / Factor at NPA*) - 1
Where:
Factors are taken from the appropriate Table LP65A to LP68B. Late retirement age and NPA should be age in complete years and months, with part months ignored.
* where the member leaves active service after NPA, the factor at leaving age should be used instead of the factor at NPA.
Stage 2 - Calculate the LPS using the LPS percentages calculated in Stage 1
LPSNPA = LPSNPA percentage x Pension at retirement which was payable from NPA**
Where:
Pension at retirement is before any commutation option is exercised if applicable and includes any inflation increases awarded between the member leaving service and the date of retirement.
** Where the member leaves active service after NPA the pension at retirement should additionally include any age addition awarded in respect of the member's post-NPA active service.
The following points should be noted:
- The LPS should be added before the commutation option is exercised.
- The contingent partner's pension should also receive a LPS increase.
On late retirement, pension debits should be increased to reflect that the debit will be in effect for a shorter period than expected.
If the debit occurred before the member's NPA, then it should be treated as a (negative) pension (i.e. payable from NPA) for the purposes of determining the LPS increase which should be applied to the debit. The debit at retirement should be calculated in accordance with the formulae above using the appropriate factor from tables LP65A-LP68A.
Pension debits apply to the contingent partner's pension, as well as the member's pension. The LPS applied to the pension debit should also be applied to the contingent partner's pension.
If the debit occurred after NPA, then the case should be referred to GAD to advise on the appropriate increase to apply to the debit.
Members who have a pension credit in the scheme as a result of Pension Sharing on Divorce and then retire after their NPA should also have an LPS increase applied to their pension credit.
The factors which should be used to calculate the LPS in this case depend on the status of the associated pension debit member at the time the pension credit was awarded. Administrators should therefore determine the status of the associated pension debit member before calculating the LPS for any pension credit members.
If the associated pension debit member was an active or deferred at the time the pension credit was awarded, then the LPS applicable to the member's pension credit should be calculated using tables LP65A-LP68A.
If the associated pension debit member was a pensioner at the time the pension credit was awarded, then the LPS applicable to the member's pension credit should be calculated using tables LP65B-LP68B.
The pension credit at retirement should then be calculated in accordance with the formulae above.
