This section refers only to benefits payable on voluntary early retirement in normal health.

Factors for all cases are shown in Table ERF1_NHSPSS_2015 in the consolidated factor workbook and should be used to reduce the benefits of members who wish to retire before their Normal Pension Age (NPA) (see Introduction). For all calculation purposes NPA should be replaced by Reduced Retirement Age (RRA) (see Introduction) where applicable to all or part of a member's entitlement. RRA will apply for some or all benefits where a member has or had an ERRBO agreement (see Allowance for ERRBO below) during their scheme membership.

Reduction factors are provided for periods of years and months. The appropriate factor should be selected based on the period between date of retirement and NPA (or RRA as applicable) in years and months, rounded up to the next higher month.

The benefits payable on early retirement are determined by applying the appropriate reduction factor to the accrued benefit entitlement(s) at the date of retirement (including revaluation and/or PI for deferred members) using the formula below and the appropriate factor(s) from Table ERF1_NHSPSS_2015 in the consolidated factor workbook. For a member with one or more RRA(s) for some or all periods of service, different factors will apply to each NPA/RRA based on the period between date of retirement and NPA/RRA.

Early retirement pension =

(Scheme pension (no ERRBO agreement) + AP (pro-rata)) x ERF1 (based on NPA)

+ (Main scheme pension (RRA(1)) x ERF1 (based on RRA(1))

+ (Main scheme pension (RRA(2)) x ERF1 (based on RRA(2))

+ (Main scheme pension (RRA(3)) x ERF1 (based on RRA(3))

- Pension debit due to Scheme pays election or divorce

Where:

ERF1 is (are) the appropriate factor(s) from Table ERF1_NHSPSS_2015.

Pro-rata refers to pro-rated for any unpaid contributions as per the NHSPS (Scotland) 2015 Regulations.

Points to note in using factors:

• All pensions should include revaluation/pension increases to date of retirement. Revaluation for retirements from active service, and for retirements from deferred status to date of leaving, are in accordance with the scheme regulations. Increases from date of leaving to date of retirement is in line with PI Act provisions.
• Scheme pension (no ERRBO agreement) should include any transferred-in benefit, revalued/increased to date of retirement (revaluation for retirements from active service, and for retirements from deferred status to date of leaving, are in accordance with the scheme regulations. Increases from date of leaving to date of retirement is in line with PI Act provisions.). It should also allow for (i.e. should be reduced for) any pension debit resulting from a divorce order (increased to date of retirement).
• Similarly any pension debit resulting from a Scheme Pays should be deducted from the amounts as shown (including increases to date of retirement).

Members may have chosen to contribute to an ERRBO agreement. The period during which the member contributed is known as the Buy-Out period. If so, the calculations should be carried out by reference to the member's "Reduced Retirement Age" (RRA) as applicable to each Buy-Out period (if the agreement has been varied), with there being at most three such periods. All benefits earned during any Buy-Out period will be subject to an effective RRA. For the purposes of this document RRA is determined based on SPA as specified in legislation at the date of the member's retirement less the period(s) of reduction secured by the agreement. Note this may be different to RRA as determined for the purposes of setting the cost of the agreement (which is linked to SPA as set out in stated Government policy); see Introduction.

For the purpose of determining the applicable ERF1 factor from Table ERF1_NHSPSS_2015 in the consolidated factor workbook, the member's RRA for each Buy-Out period should be used separately in place of the member's NPA. Thus different factors are applicable to benefits accrued at different times.

On early retirement, pension debits should be reduced to reflect that the debit will be in effect for a longer period. Pension debits should be treated as (negative) main scheme pension for the purposes of determining which reduction factors should be applied and should include increases to date of retirement (in line with PI Act provisions).

Subject to meeting certain conditions, members liable for 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'). Some members may have previously elected for tax charges to be met by Scheme Pays. In this case a reduction (debit) to the pension benefits should be made when the member takes their benefits.

The benefit reduction is in the form of a deferred pension debit, subject to annual increases in line with the Pension (Increase) Act 1971. Dependants' benefits are unaffected by Scheme Pays, i.e. reductions do not apply to dependants' benefits payable on death in retirement.

On early retirement, the pension debit (increased to date of retirement) due to Scheme Pays should be deducted from main scheme benefits before they are reduced to allow for early retirement. 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.

No specific test is required on retirement in cases where a member has a GMP in the NHSPSS 2015 as a result of a transfer into the scheme.