An uplift is applied to 2008 section members' pensions when retiring from active service after age 65 in accordance with scheme regulations. No uplift is applied to 1995 section members' main scheme pension, Added Years' pension or Additional Pension in the 1995 sections.
A new policy is in force so that members of the 2008 Section who opted out of the scheme but remain in employment beyond Normal Pension Age may be entitled to an uplift when retiring. This change has not yet been introduced through scheme regulations. No such uplift is applied to any other retirements from preserved status.
The benefits payable on late retirement are determined by applying the appropriate uplift factor to the relevant benefit entitlement (i.e. only service up to age 65) at the date of retirement as follows. The factors are provided in Late Retirement Factors.
Late retirement pension =
Main scheme pension calculated on service to 65 x Factor LRF1
+ Main scheme pension for service after age 65
+ Additional Pension (option exercised before 01/04/2011 with a Normal Pension Age of 65) x Factor LRF2
+ Additional Pension (option exercised after 01/04/11 with a Normal Pension Age of 65) x Factor LRF3
Points to note on use of factors:
- Main scheme pension should be based on final pensionable pay at date of exit.
- Factors should be applied before any lump sum commutation option is exercised.
- Factors for additional pension to be applied to additional pension purchased revalued to age 65 plus increases from then to the date of exit.
Late retirement pension =
Main scheme pension which attracts a late retirement increase x Factor LRF1
+ Main scheme pension which does not attract a late retirement increase
- Mandatory lump sum x LRF4
+ Additional Pension (option exercised before 01/04/2011 with a Normal Pension Age of 65) x Factor LRF2
+ Additional Pension (option exercised after 01/04/11 with a Normal Pension Age of 65) x Factor LRF3
For members aged 65 before 1 April 2008, 'Main scheme pension which attracts a late retirement increase' is defined as all pension in respect of service to 1 April 2008. For these members, 'Main scheme pension which does not attract a late retirement increase' is all pension in respect of service after 1 April 2008.
For members aged 65 after 1 April 2008, 'Main scheme pension which attracts a late retirement increase' is defined as all pension in respect of service to age 65. For these members, 'Main scheme pension which does not attract a late retirement increase' is all pension in respect of service after age 65.
Mandatory lump sum is paid unadjusted.
Points to note on use of factors:
- Factors should be applied before any lump sum commutation option is exercised including in respect of mandatory lump sum.
- Factors for main scheme pension to be applied to pension calculated on service to age 65 and final reckonable pay at date of exit.
- Factors for Additional Pension to be applied to Additional Pension purchased revalued to age 65 plus increases from then to the date of exit.
For late retirements of members from the 1995 section no adjustment should be made to the pension debit to reflect later debit (other than to include PI increases to actual date of retirement).
For late retirements of members of the 2008 section where the member divorced before age 65, the pension debit should be treated as additional pension for the purposes of determining the late retirement factor to be applied. That is, the pension debit should be increased by applying Factor LRF3.
For late retirements of members of the 2008 section, if the member divorced after age 65, the pension debit should also be increased to allow for the debit coming into effect later than NPA. However, in the same way that after age 65 not all pension attracts a late retirement uplift, only part of the debit should be increased.
The pension debit should first be proportioned by the amount of main scheme pension which attracts a late retirement uplift:
Pension debit to attract an uplift = Pension debit x Main scheme pension which attracts an uplift / Total main scheme pension
The late retirement uplift to be applied needs to reflect the date at which the debit was calculated:
Pension debit uplift = Factor LRF3 for age at retirement / Factor LRF3 for age at date of divorce
Therefore, the overall pension debit on late retirement for 2008 section late retirees who divorced after age 65 is:
Overall pension debit = Pension debit x (Scheme pension which attracts an uplift / Total main scheme pension) x (LRF3 age at retirement / LRF3 for age at divorce) + Pension debit x (Scheme pension which does not attract an uplift / Total main scheme pension)
Subject to meeting certain conditions, members liable to an Annual Allowance charge can make an election requiring the Scheme to pay an amount of the charge on their behalf out of their pension benefits (referred to as Scheme Pays). A scheme pays debit is determined for any year an election is made (a negative deferred benefit). This debit is applied when the member takes their benefits.
The debit is subject to annual increases in line with the Pension (Increase) Act 1971, before it comes into payment and once in payment. Dependants' benefits are unaffected by Scheme Pays, i.e. reductions do not apply to dependants' benefits payable on a member's death.
For late retirements of members from the 1995 section no adjustment should be made to the pension debit to reflect later debit (other than to include PI increases to actual date of retirement). For late retirements of members from the 2008 section if the debit relates to any period pre NPA, the debit should be treated as Additional Pension for the purposes of determining the late retirement factor to be applied. That is, the pension debit should be increased by applying Factor LRF3. Please refer to GAD for any cases where the debit applies for a period including or after NPA.
The debits should be applied to benefits before any other member options are exercised, e.g. commutation. Please refer to the Scheme Pays guidance for more details and factors required to calculate this benefit reduction.
