The contributions payable by employing authorities, where a pension becomes payable to a member on early retirement on termination, 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. Contributions required from employing authorities provide for unreduced benefits to be payable in these circumstances.
The cost of members receiving an unreduced pension on compulsory early retirement pension is determined as below. For this purpose, NPA is equal to a member's State Pension Age, minimum age 65, as specified in legislation at the date of the member's retirement.
The cost of unreduced pension = Main scheme pension x (1 - ERF1) x Factor CER1
Where:
ERF1 is the early retirement factor applicable to the member depending on period before NPA (in years and months) and is detailed in the latest version of the GAD guidance on voluntary early and late retirement in normal health.
CER1 is applicable to the member's age at retirement in complete years and months from Table CER1 (Table 813 in the consolidated factors workbook)
The basic pension used in the calculation should include any transferred-in service but exclude any Additional Pension. Additional Pension is not covered by the compulsory early retirement regulations and so is subject to an early retirement reduction if paid before NPA. Please see the latest version of the GAD guidance on voluntary early and late retirements in normal health for more information.
Factors should be applied to pensions before any allowance for commutation.
The calculation above is for a single contribution payment. If it is agreed that payments may be spread please refer to GAD for a spreading factor. This is not an option automatically available in the regulations.
In some cases a modified NPA should be used to determine the factor applicable to some or all benefits. For a member with an Early Retirement Reduction Buy-Out (ERRBO) agreement, the factor(s) applied to benefits accrued during the term of the agreement should be determined based on the member's Reduced Retirement Age(s) (RRA) as determined at the date of retirement.
For the purposes of this guidance RRA is determined based on Normal Pension Age as defined in legislation i.e. SPA as specified in legislation at the date of the member's retirement less the period of reduction secured by the agreement. This may be different to RRA as determined for the purposes of setting the cost of the agreement (which is linked to NPA as set out in stated Government policy).
For the purpose of determining the applicable ERF1 factor, the member's RRA for each Buy-out period should be used separately in place of the member's NPA. Please see the latest version of the GAD guidance on voluntary early and late retirements in normal health for more information.
