Those in receipt of benefits do not have an entitlement to a cash equivalent transfer value. The pensioner cash equivalent can be calculated using the method in this guidance, but these should be used for divorce purposes only.
There are 2 sets of tables to be used in the calculation of pensioner cash equivalents:
DIV1 | Pensioners who retired for any reason other than ill-health grounds |
DIV2 | Pensioners who retired on ill-health grounds |
Separate tables are required for pensioners who retired in ill health to reflect shortened expectations of life and to allow for immediate pension increases.
The calculation date should be selected in line with the approach set out in Cash equivalents on divorce: general considerations.
The status of the member, the member's age last birthday and the benefits to be valued should all be taken at the calculation date. Further details on the benefits to be used are set out below.
In line with Adjustments for Guaranteed Minimum Pension, GMP adjustments should not be applied to calculations for members who reach State Pension age on or after 6 April 2016.
For these members, calculations should be undertaken using the methodology set out below, but with any GMP (pre or post 1988) set to zero.
The pensioner cash equivalent for a member who retired for any reason other than ill health should be calculated as follows:
Pensioner cash equivalent (not ill health) =
(Current Member's Pension x Factor DIV1A)
+ (Survivor Pension payable on the death of the member x Factor DIV1B)
- [(Annual Pre 88 GMP*/** + 0.15 x Annual Post 88 GMP*/**) x Factor DIV1C]
* If any GMP liability has been transferred into the scheme.
** Annual Pre 88 GMP and Annual Post 88 GMP should be set to zero for members who reach State Pension age on or after 6 April 2016
The appropriate factors should be taken from table DIV1 for the member's age last birthday at date of calculation. The appropriate factor for Factor DIV1C will also depend on the sex of the member.
The pensioner cash equivalent for a member who retired due to ill health should be calculated as follows:
Pensioner cash equivalent (ill health) =
(Current Member's Pension x Factor DIV2A)
+ (Survivor Pension payable on the death of the member x Factor DIV2B)
- [(Annual Pre 88 GMP*/** + 0.15 x Annual Post 88 GMP*/**) x Factor DIV2C]
* If any GMP liability has been transferred into the scheme.
** Annual Pre 88 GMP and Annual Post 88 GMP should be set to zero for members who reach State Pension age on or after 6 April 2016
The appropriate factors should be taken from table DIV2 for the member's age last birthday at date of calculation. The appropriate factor for Factor DIV2C will also depend on the sex of the member.
Pension benefits:
- The member's pension should be the rate of pension in payment. The last increase should be that awarded up to and including the April increase immediately before the calculation date
- If the member's pension has been reduced because an allocation option was taken out, then the pension actually in payment (i.e. after the reduction) should be used (including subsequent pension increases) and the pension payable on the member's death should include any increase due to the allocation option. If allocation has been made to a child or other dependant other than the partner please refer to GAD.
- If the member's pension is reduced due to abatement, then the abatement reduction should be ignored for the purpose of this calculation. Benefits should be calculated as though the member had ceased re-employment on the date of calculation and valued accordingly.
- If the member's pension has been reduced due to Scheme Pays, then the pension after this reduction should be used. However, cases involving compulsory early retirement where the implementation of the pension debit has been deferred should be referred to GAD.
Guaranteed Minimum Pension:
- Where a member has an entitlement to a GMP as a result of a transfer into the scheme the following should be noted:
- For members who reached State Pension age before 6 April 2016, the cash equivalent must be adjusted to reflect increases on the GMP that are the responsibility of the State. These comprise all increases on pre-April 1988 GMPs and increases above 3% pa on the post-April 1988 GMPs. Separate pre and post-1988 GMPs should therefore be used.
- Where the member has yet to retire, or retired after GMP Payment Age (i.e. 65 for men or 60 for women), the GMP should include any late retirement increases from GMP payment age to calculation date (if yet to retire) or from GMP Payment Age to date of retirement (if already in payment). Late retirement increases are due at a rate of 1/7% per week plus (for post-88 GMP) PI up to 3% pa up to the April preceding the calculation date.
