This section covers the calculations appropriate for members subject to benefit reduction due to AA charges and where a CETV is to be paid. A gross CETV should be calculated in the usual way at the relevant date, ignoring the negative DC pot. The notional negative DC pot should then be revalued up to the date at which the CETV is calculated. The CETV payable would then be as follows:

Net CETV = Gross CETV - revalued Negative DC pot

If the transfer-out option forms are received within the guarantee period there is no requirement to amend the total negative DC balance. If the forms are received outside the guarantee period, the total negative DC balance should be revalued only where a revised CETV is calculated.

The calculation of a CETV is subject to an underpin if the member has received a transfer-in of benefits from another scheme. If the underpin bites, the value of the underpin is usually paid. It is extremely unlikely that there would be case where an underpin bites where a member has exercised Scheme Pays, which would have the result that the Annual Allowance charge paid by the HSCPS 2015 could not be recouped. However, should such a case arise, this should be referred to GAD.

As for CETVs, a gross transfer value should be calculated in the usual way at the relevant date ignoring the negative DC pot. The notional negative DC pot should also be revalued up to the date at which Club transfer is calculated. The Club transfer payable would then be as follows:

Net transfer = Gross Club Transfer Value - revalued Negative DC pot

HSC will also need to provide the Club scheme with a second transfer statement. This should cover the value of the gross transfer value (i.e. before deduction of the negative DC balance) in order for the Club scheme to calculate the membership credit. It will also mean that the Club scheme can determine the negative DC balance used in the transfer calculation which can then be converted into a Scheme Pays debit (or other method of recovery).

Where the member had elected to utilise Scheme Pays with their previous scheme, HSC should receive a transfer-in payment allowing for this (i.e. with any Scheme Pays pension debit or notional negative balance already having been deducted). The earnings credit can then be calculated on this net CETV payment.

Where a member with a previous Scheme Pays election receives a transfer-in from a Club scheme, the transfer value payment will be net of any deduction due to the Scheme Pays election. In addition, HSC will receive a calculation of the gross Club Transfer calculation (i.e. excluding the reduction for Scheme Pays) in order to calculate the membership credit.

An earnings credit in the HSCPS 2015 should be calculated in the usual way based on the gross transfer amount quoted at the relevant date.

The difference in the gross transfer value quoted and the transfer payment actually received should be taken to be the negative DC pot in the HSCPS 2015 as at the date of transfer. Interest will then apply to the negative DC pot from 1 January (following receipt of the transfer payment) until benefits become payable or transferred.