An overall limit for an ERRBO agreement is set at first commencement of the contract.

The principle of the limit is that the aggregate of Additional Pension (AP) and an ERRBO agreement should result in a total member funded pension of no more than £6,500 per annum (set for 2015/16 and expected to be indexed in line with PI increases).

The only exception to this limit is at the outset of the ERRBO agreement if at that time the member has no existing AP contract (any AP or AY contracts in the HSCPS are ignored for this purpose). In this case, a higher expected value of pension may be provided for through ERRBO. On application for an ERRBO agreement a limited Reduced Retirement Age ("RRAL") should be determined.

Members may only enter into an ERRBO agreement if the selected Reduced Retirement Age (RRA) is greater than or equal to the RRAL. There is no requirement to reassess RRAL if the member subsequently elects to buy AP (or additional AP), although there may be restrictions on the amount of AP which may be secured. The application of those limits are set out in the latest HSCPS 2015 Purchase of Additional Pension guidance.

The formulae required to calculate the RRAL at outset of an ERRBO agreement are given below:

a) No existing AP contracts (any AP or AY contracts relating to the HSCPS are disregarded for this purpose)

RRAL (=RRAM) = higher of 65, NPA - 3 (integral values only)

b) Existing AP contract(s)

Calculate:

B - A, and

L - A

Where:

B = the maximum potential value of an ERRBO contract for the member

= (future service) x pay x 1.015^{(future service)} x (1- ERF) / 54

A = value (at calculation date i.e. including PI to April preceding date of calculation) of existing AP purchased (assuming any regular contribution contracts will be completed (unless already lapsed)

L = overall limit on extra pension as specified in scheme regulations.

And:

(future service) = service in years and days from ERRBO commencement date to RRAM

ERF = that applicable for the period NPA to RRAM

Pay = whole time equivalent pensionable pay at calculation date

Calculate C = greater of (B - A) and (L - A)

If B < C : RRAL = RRAM

Otherwise (i.e. if B > C) calculate:

B1 - A

Where:

B1 = the potential value of an ERRBO contract for the member with (RRAM + 1 year) (if (RRAM + 1 year) > PNPA there is no scope for ERRBO contributions)

= (future service1) x pay x 1.015^{(future service1)} x (1 - ERF1) / 54

A = as above

And:

(future service1) = service in years and days from ERRBO commencement date to (RRAM + 1 year)

ERF = that applicable for the period NPA to (RRAM +1 year)

Pay = whole time equivalent pensionable pay at calculation date

Calculate C1 = greater of (B1 - A) and (L - A)

If B1 < C1 : RRAL = RRAM + 1 year

Otherwise (i.e. if B1 > C1) calculate:

B2 - A

Where:

B2 = the potential value of an ERRBO contract for the member with (RRAM + 2 years) (if (RRAM + 2 years) > PNPA there is no scope for ERRBO contributions)

= (future service2) x pay x 1.015^{(future service2)} x (1- ERF2) / 54

A = as above

And:

(future service2) = service in years and days from ERRBO commencement date to (RRAM + 2 years)

ERF = that applicable for the period NPA to (RRAM + 2 years)

Pay = whole time equivalent pensionable pay at calculation date

Calculate C2 = greater of (B2 - A) and (L - A)

If B2 < C2 : RRAL = RRAM + 2 years

Otherwise (i.e. if B2 > C2) : there is no scope for ERRBO contributions.

RRAL as above should be determined on first application for an ERRBO agreement. Applications to increase ERRBO contributions (in accordance with the scheme regulations) beyond the RRA initially selected may be taken up to a minimum of RRAL, regardless of any subsequent AP contracts (although restrictions may apply to such AP applications). The earlier RRA will apply only in respect of benefits earned during the period(s) over which increased ERRBO contributions are paid.