In certain situations members may have some or all of their benefits with an earlier "beginning date" for PI purposes than the actual date of retirement. For example, this may occur due to periods of service with pay protection.
Where members retire in these circumstances before age 55 an adjustment needs to be calculated in respect of the deferred pension increases which cannot be paid until age 55 under the Pensions (Increase) Acts.
The PI adjustment should be calculated by applying the relevant factor in Factors to calculate employer costs on compulsory early retirement to the amount of deferred PI as at the date of retirement. For NPA 55 members this should be deducted from the costs calculated as described in Compulsory Early Retirement - 1995 section members of this guidance and for NPA 60 members it should be added to the costs calculated as described in Compulsory Early Retirement - 1995 section members of this guidance.
In some cases the full deferred PI due may not be known at the date of calculation (as some PI may be due when tables are published for the following year). For practical reasons only the deferred PI up to the April prior to the date of calculation should be included within these calculations, i.e. any part year PI is not to be included.
Adjustment due to deferred PI = Amount of deferred PI on lump sum x Factor CER9
Points to note in using factors:
- This calculation produces a saving which should be used to adjust the additional costs for the early payment of the lump sum ignoring deferred PI calculated as described in Compulsory Early Retirement - 1995 section members, subsection Employer costs on compulsory early retirement for a 1995 section member (NPA 55) of this guidance. (This is different from the deferred PI adjustment for NPA 60 members, which represents an increase in the charge to employers).
- Factor CER9 should be based on a members age in years and complete months
Additional cost due to deferred PI =
Cost of deferred PI on pension payments from age 55 up to age 60
+ Cost of deferred PI on lump sum at age 55
where:
- Cost of deferred PI pension payments from age 55 up to age 60
= Amount of deferred PI on pension at date of retirement x Pension Factor CER10 - Cost of deferred PI on lump sum at age 55
= Amount of deferred PI on lump sum x Lump Sum Factor CER10
Points to note in using factors:
- The calculation above is for a single contribution payment. See Payment options: spreading costs or capitalisation after redundancy of this guidance for how to spread this as instalments.
- This cost is in addition to the normal costs calculated as described in Compulsory Early Retirement - 1995 section members of this guidance
- The additional costs calculated above should therefore be added to the costs calculated in Compulsory Early Retirement - 1995 section members, subsection Employer costs on compulsory early retirement for a 1995 section member (NPA 60) of this guidance. This is different from the deferred PI adjustment for NPA 55 members, which represents a reduction in the charge to employers.
- Factor CER10 should be based on a members age in years and complete months.
