The contributions payable by employing authorities where a pension becomes payable to a member under early retirement (redundancy etc) or early retirement pension (redundancy etc new starters and post-transition) are determined by applying the appropriate factor to the accrued benefit entitlement(s) at the date of retirement using the formula below and appropriate factors from this guidance. This determines the cost of paying unreduced benefits on retirement.

The factors allow for the fact that Pension Increases (PI) are not payable until age 55 and therefore no adjustments are needed at age 55 other than addition of accrued PI.

Where a member is made redundant before age 55 and some or all of their benefits have an earlier "beginning date" for PI purposes, the factors should be applied to the benefits payable at retirement that is without any allowance for the deferred PI. An additional cost in respect of the deferred PI should be calculated as described in Adjustments required where members have deferred PI section of this guidance.

Where a member is made redundant before age 55 and they have at least one dependant child, increases are payable immediately to that part of the pension benefit accrued before 1 January 1993 (female members) or that part of their benefit accrued between 17 May 1990 and 31 December 1992 inclusive (male members) (in accordance with Pensions Increase Act (1971)). Different factors which allow for PI payable immediately are required for this part of the pension and are included in this guidance.

Members with benefits in both the NHSPSS 2015 and NHSPS Scotland covers members with benefit entitlement from both the NHSPS Scotland and NHSPSS 2015. On redundancy before age 55 only benefits from the 1995 section of the NHSPS Scotland are available. No further accrual in the NHSPSS 2015 is permitted if NHSPS Scotland benefits become payable in these circumstances.

Employer costs on compulsory early retirement for a 1995 section member (NPA 55)

Cost due to pension = Costs of basic and enhancement pension payments up to age 55 + costs of service enhancement pension payments after age 55

Where:

• Employer costs of basic and enhancement pension payments up to age 55 = (Scheme pension + extra pension from service enhancement) x Factor CER1
• Employer costs of service enhancement pension payments after age 55 = Extra pension from service enhancement x Factor CER2

Cost due to lump sum = Costs of early payment of the basic lump sum + additional lump sum from service enhancement

Where:

• Employer costs of early payment of the basic lump sum= Basic lump sum x Factor CER3

Employer costs on compulsory early retirement for a 1995 section member (NPA 60)

Cost due to pension = Costs of basic and enhancement pension payments up to age 60 + costs of service enhancement pension payments after age 60

Where:

• Cost of basic and enhancement pension payments up to age 60 = (Scheme pension + extra pension from service enhancement) x Factor CER4
• Cost of extra membership pension payments after age 60 = Extra pension from service enhancement x Factor CER5

Cost due to lump sum = Costs of early payment of the basic lump sum + additional lump sum from service enhancement

Where:

• Cost of early payment of the basic lump sum = Basic lump sum x Factor CER6

Employer costs on compulsory early retirement for a 1995 section (NPA 55) member under age 55 with at least one dependant child

Cost due to pension =

Costs of basic and enhancement pension payments up to age 55 on service from 1 January 1993 for female members and service before 17 May 1990 and after 31 December 1992 for male members

+ costs of basic and enhancement pension payments up to age 55 on service before 1 January 1993 for female members and service between 17 May 1990 and 31 December 1992 inclusive for male members

+ costs of service enhancement pension payments after age 55

Where:

• Cost of basic and enhancement pension payments up to age 55 on service from 1 January 1993 for female members and service before 17 May 1990 and after 31 December 1992 for male members
  = (applicable scheme pension + extra pension from service enhancement) x Factor CER1
• Cost of basic and enhancement pension payments up to age 55 on service before 1 January 1993 for female members and service between 17 May 1990 and 31 December 1992 inclusive for male members = (applicable scheme pension) x Factor CER11
• Cost of extra membership pension payments after age 55 = Extra pension from service enhancement x Factor CER2

Cost due to lump sum = Costs of early payment of the basic lump sum+ additional lump sum from service enhancement

Where:

• Cost of early payment of the basic lump sum = Basic lump sum x Factor CER3

Employer costs on compulsory early retirement for a 1995 section (NPA 60) member under age 55 with at least one dependant child

Cost due to pension =

Costs of basic and enhancement pension payments up to age 60 on service from 1 January 1993 for female members and service before 17 May 1990 and after 31 December 1992 for male members

+ costs of basic and enhancement pension payments up to age 60 on service before 1 January 1993 for female members and service between 17 May 1990 and 31 December 1992 inclusive for male members

+ costs of service enhancement pension payments after age 60

Where:

• Cost of basic and enhancement pension payments up to age 60 on service from 1 January 1993 for female members and service before 17 May 1990 and after 31 December 1992 for male members = (applicable scheme pension + extra pension from service enhancement) x Factor CER4
• Cost of basic and enhancement pension payments up to age 60 on service before 1 January 1993 for female members and service between 17 May 1990 and 31 December 1992 inclusive for male members = (applicable scheme pension) x Factor CER12
• Cost of extra membership pension payments after age 60 = Extra pension from service enhancement x Factor CER5

Cost due to lump sum = Costs of early payment of the basic lump sum+ additional lump sum from service enhancement

Where:

• Cost of early payment of the basic lump sum = Basic lump sum x Factor CER6

Points to note in using the factors:

• The basic pension/lump sum used in the calculation should include any transferred-in service but exclude any added years (AY) or additional pension (AP).
• Main scheme pension/scheme lump sum refers to the unreduced amounts of benefit which would be payable if no actuarial adjustment is to be applied; and should be consistent with the basic pension/lump sum as above (i.e. exclude any AY or AP).
• Service enhancements are no longer provided and thus should only be used in the formulae above where an Employing Authority is settling payments by quarterly billing.
• The calculation above is for a single contribution payment. See the Payment options: spreading costs or capitalisation after redundancy section for how to spread this as instalments.
• Where a member has any deferred PI, the costs due to the lump sum should be adjusted. For NPA 55 members this adjustment is the amount calculated in Employer costs for deferred PI on compulsory early retirement for a 1995 section member (NPA 55) and represents a saving on the costs charged to the employer. For NPA 60 members additional costs are due as calculated in Employer costs for deferred PI on compulsory early retirement for a 1995 section member (NPA 60).
• The overall calculated cost to the employer due to the lump sum is subject to a minimum of £0.
• Factors should be applied to pensions before any allowance for commutation.
• Factors should be based on a members age in years and complete months.

Compulsory early retirement is not allowed if the pension payable will be less than the member's guaranteed minimum pension (GMP) at GMP payment age (65 for males and 60 for females). The following test should be applied to check whether a member is eligible for compulsory early retirement.

The GMP must be covered by the reduced value of the pension after a member has exercised any commutation option (and therefore also after any pension debits due to divorce or Scheme Pays have been applied). It may be therefore that compulsory early retirement is permitted but only if no or a restricted amount of pension is commuted.

The GMP test is set out below:

Step 1 - eligibility for compulsory early retirement

• Calculate what the member's compulsory early retirement pension (A) would be, excluding any Added Years but including any transferred-in service (and before any commutation option).
• Take revalued annual GMP at date of retirement (allowing for the better of male and female GMP following equalisation) and add 2.20% for each complete year to GMP payment age:
  B = Revalued GMP at retirement date × [1 + 2.20% x (period to date GMP payable)]
• Check whether A is greater than B. If yes, the member is eligible for compulsory early retirement at the relevant age. Otherwise, compulsory early retirement at the relevant age is not permitted.

Step 2 - scope for commutation

• Apply the commutation factor to the additional lump sum required and calculate the residual pension:
  C = Total pension* (A) - (additional lump sum / 12)
  *after application of ERF if applicable
• Check whether C is greater than B. If yes, the member is eligible to benefit C, i.e. commutation up to the relevant additional lump sum.
• Otherwise the member is only permitted to exchange a smaller proportion of pension for a lump sum of up to 12 x (A - B), with corresponding reduction in pension of (A - B).