This section sets out the method and instructions for calculating cash equivalents on divorce, and calculating pension credits and pension debits.

In any divorce proceedings dealing with the division of matrimonial assets, the parties are required to disclose to each other and to the Court, all their financial interests. This will include details relating to pension benefits that are shareable regardless of whether a pension sharing order will eventually be made.

The calculations set out in this guidance determine the value of pension rights for a member with benefits in the 2006 Scheme, as required for the divorce proceedings. The methods described should be used both when a member applies for a quotation of the value of the benefits during the divorce proceedings, and after a pension sharing order has been made.

The calculations required and the factor tables used depend on the status of the member at the calculation date, including their age, normal pension age and the date on which they will reach (or did reach) State Pension age.

The methodology for former members who are receiving pension benefits at the time of the divorce is set out in the Cash equivalents on divorce: Members already in receipt of benefits section. The Cash equivalents on divorce: Active members and deferred pensioners section covers the provisions for serving police officers and deferred pensioners.

If the other party in the divorce proceedings also has 2006 Scheme benefits, or either party has 1988 or 2015 Scheme benefits, then separate valuations are required in respect of those pension rights.

For divorce cases in Scotland, the cash equivalent calculated in accordance with this guidance is then adjusted in accordance with the Divorce etc (Pensions) (Scotland) Regulations 2000, subject to any relevant case law

The calculation date will depend on the stage of the divorce:

• If a quotation is required for part of the proceedings, in Scottish cases, the calculation date will usually be specified by the Court. For divorces in England, Wales and Northern Ireland, the calculation date used should be consistent with the date used for normal transfer value calculations (i.e. the guarantee date).
• If the calculation is being done after a pension sharing order has been made, the calculation date should be day on which the relevant order or provision takes effect. This is often referred to as the "transfer day", as defined in the Welfare Reform and Pensions Act 1999 (the 1999 Act). The 1999 Act applies in England, Wales and Scotland. The corresponding legislation in Northern Ireland is the Welfare Reform and Pensions (Northern Ireland) Order 1999.

Factors should be selected with reference to the member's status and age last birthday at the calculation date, which should be determined in line with the section above.

For calculations being completed after a pension sharing order has been made, there may be some time between the calculation date (which should be the day on which the relevant order or provision takes effect) and the date on which administrators process the calculation (sometimes referred to as the "valuation day", as defined in the 1999 Act). In some cases, it's possible that different sets of factors will be in force on the two dates. In these circumstances, the set of factors that are in force on the day administrators process the calculation should be used. Individual factors should be selected from this factor set with reference to the member's or ex-partner's status and age last birthday at the calculation date, in the normal way.

Full details of the benefits to be included in the calculation of cash equivalents for divorce purposes are set out in the Cash equivalents on divorce: Members already in receipt of benefits section for members in receipt of scheme benefits and the Transfer values on transfers out of the 2006 scheme section for active and deferred members.

It is important that the amount of all relevant benefits used in the calculation should be the amount taken immediately before the calculation date, consistent with the 1999 Act.

GMP equalisation: impact on calculations

In previous versions of this guidance prior to August 2019, a GMP adjustment was applied to all cash equivalent calculations. This adjustment was to reflect the inflationary increases on a member's Guaranteed Minimum Pension (GMP), which have historically been the responsibility of the State after GMP Payment Age.

However, following the requirement to equalise GMPs, from August 2019, GMP adjustment factors should no longer be applied in calculations for members who reach State Pension age (SPA) on or after 6 April 2016.

The cohorts of members who reach SPA on or after 6 April 2016 are:

• Males with a date of birth on or after 6 April 1951
• Females with a date of birth on or after 6 April 1953

For members with an accrued GMP in the cohorts listed above, calculations of cash equivalents of member benefits should be undertaken using the methodology set out in this guidance but with any GMP (pre or post 1988) set to zero. (Debits to a member's GMP following a divorce still need to be determined however.)

For the majority of affected calculations, the difference between the original and revised quotation is expected to be small, relative to the total transfer value. Not applying the GMP adjustment factors will increase the total transfer value.

For members who reached SPA before 6 April 2016, GMP adjustment factors should be applied.

Members already in receipt of benefits do not have an entitlement to a cash equivalent transfer value. The pensioner cash equivalent value can be calculated using the method and factors in this guidance, but should be used for divorce purposes only.

There are two sets of tables:

• Table G_06 : Pensioners who retired on ordinary grounds
• Table H_06 : Pensioners who retired on medical grounds.

The main difference between Table G_06 and Table H_06 is that Table H_06 allows for the heavier mortality experienced on average by those who retire due to ill health.

For ill-health pensioners under the age of 55, Table H_06 should only be used where full pension increases are payable in the period up to age 55. If a member's pension has commenced on ill health grounds, and pension increases are not payable before age 55 then the case should be referred to the DoJ.

Calculation

The pensioner cash equivalent (CE) should be calculated as follows:

CE = (CP x F_p) + (SUR x F_sur) - ([PRE GMP + (G_post88 x POST GMP)] x F_pregmp)

CP = current member's pension, see the Pension benefits section

SUR = pension payable on the death of the member to their spouse or partner, see the Pension benefits section

PRE GMP = annual GMP accrued before 6 April 1988, including revaluation (for those who reached SPA before 6 April 2016; see the Guaranteed Minimum Pension section) or zero (for those who reached SPA on or after 6 April 2016)

POST GMP = annual GMP accrued from 6 April 1988, including revaluation (for those who reached SPA before 6 April 2016; see the Guaranteed Minimum Pension section) or zero (for those who reached SPA on or after 6 April 2016)

F_p = factor for member's pension - Table G1_06, G2_06, H1_06 or H2_06

F_sur = factor for survivor's pension - Table G1_06, G2_06, H1_06 or H2_06

F_pregmp = factor for GMP saving accrued before 6 April 1988 - Table G1_06, G2_06, H1_06 or H2_06

G_post88 = conversion factor applied to GMP deduction, for GMP amount in respect of service from 6 April 1988. When calculating the deduction for GMP, the factor given should be applied to the sum of the GMP amount in respect of service up to 5 April 1988 and 15% of the GMP amount in respect of service after that date.

Pension benefits

The member's pension (CP) should be the rate of pension in payment at the calculation date. The survivor's pension (SUR) should be the rate at which a post-retirement widow(er)'s pension would be payable had the member died immediately before the calculation date. The last pension increase should be that awarded up to and including the April increase immediately prior to the calculation date.

If the member's pension is reduced due to abatement or suspension due to re-employment, 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 and valued accordingly.

If the member retired on ill health grounds and the police authority has reduced the pension because it had been demonstrated that the pensioner had brought about the disability by his own default, please refer the case to the DoJ.

Guaranteed Minimum Pension

For members who reached State Pension Age before 6 April 2016, the cash equivalent must be adjusted to reflect increases on the Guaranteed Minimum Pension (GMP) that are the responsibility of the State. Separate pre and post 1988 GMP figures need to be used.

Where the GMP is not yet in payment, the GMP amounts used in the calculation should include revaluation using Section 148 orders. Where the GMP is in payment, the GMP amounts used in the calculation should be the actual GMP amounts in payment at the calculation date. Annual GMP figures can be obtained by multiplying the weekly GMP figures by 52.

Where the benefits have not yet come into payment, the cash equivalent value quoted should be the same as the statutory CETV (i.e. non-Club transfer value) that would be payable. This should generally be calculated using the same approach as would apply to a normal non-Club transfer value, even if the member is not normally entitled to a transfer value.

The benefits to be valued for serving police officers are those that would be payable if the member had left service - either deferred benefits or the payment of immediate benefits. Those with less than three months of service would normally be entitled only to a refund of contributions. However, deferred benefits should be valued for divorce purposes.

The calculation date should be selected in line with the Cash equivalents on divorce: General considerations section of this guidance.

The cash equivalent value should be calculated in accordance with the Transfer values on transfers out of the 2006 scheme section of this guidance. Note that if the member has previously received a transfer in of benefits from another scheme then the underpin as set out in Underpin in respect of previous transfer in in the Transfer values on transfers out of the 2006 scheme section should apply to the cash equivalent value. Similarly, the member contribution underpin set out in Member contribution underpin to CETV in the Transfer values on transfers out of the 2006 scheme section also applies to the cash equivalent value. (That is, the underpins in the Underpin in respect of previous transfer in and Member contribution underpin to CETV subsections apply to both CETV calculations and to calculations where a cash equivalent value is required for pension sharing on divorce purposes).

Where a member has one or more pension debits (either in respect of a previous divorce or one or more annual allowance tax charges), the cash equivalent should be calculated in two stages.

1. The gross cash equivalent should be calculated ignoring all pension debits.
2. The value of each pension debit (revalued to the calculation date) should be calculated as the cash equivalent of a deferred pension of the same amount as the debit.

The final cash equivalent to be used for divorce purposes is the gross cash equivalent calculated in stage one, less the value of all pension debits calculated in stage two.

When a pension sharing order is received from the Court, the first stage is to check that all the necessary information has been provided and any charges requested at this stage have been paid. The value of the member's benefits should be recalculated, as described in the paragraphs above. In the case of an active member, the benefits should be those to which the member would be entitled if pensionable service had terminated immediately before the transfer day (the transfer day is the day when the order takes effect). The cash equivalent should be based on the age of the member at the calculation date which will be the "transfer day".

For divorces under English law and Northern Irish law, the pension sharing order will specify the percentage of the member's benefits that the ex-partner will be entitled to. The member's cash equivalent obtained above should be multiplied by this percentage, to give the value of the ex-partner's benefits, or the ex-partner's cash equivalent (ESCE):

ESCE = ( CE x appropriate percentage / 100 ) - Charges

CE = cash equivalent of the member's benefits

Charges = are any charges to cover the cost of the work generated by the pension sharing order, which the police authority have decided should be deducted from the value of benefits awarded to the ex-partner

Under Scottish law, the pension sharing order will usually specify a monetary amount (MA). The percentage for the pension debit should be calculated as the ratio of the monetary amount and the cash equivalent:

appropriate percentage = ( MA / CE ) x 100

Use the appropriate percentage to calculate the ex-partner's cash equivalent using the ESCE formula. The ESCE will be equal to the monetary amount specified in the order, less charges.

The value of the shareable rights calculated in this way should be used to derive both the pension debit and the pension credit, as described in the paragraphs below.

This section sets out the method for calculating the pension credit payable to the ex-partner following the issue of a pension sharing order by the Court. Table K_06 sets out the factors needed to calculate the pension credit for the ex-partner.

The calculation factors should be selected using the age of the ex-partner at the transfer day. Do not use the age of the member.

Calculation where the member is a current pensioner

If the member is a current pensioner and so has received their lump sum, the pension credit will be:

ESCE / F_p

ESCE = the ex-partner's cash equivalent - see the Calculation of the value of the shareable rights section

F_p = factor for ex-partner's pension - Table K_06

Calculation where the member is an active member or a deferred pensioner

If the member is an active member or a deferred pensioner and so has not received their lump sum, the pension credit will be:

ESCE / [F_p + (4 x F_ls)]

ESCE = the ex-partner's cash equivalent - see the Calculation of the value of the shareable rights section

F_p = factor for ex-partner's pension - Table K_06

F_ls = factor for ex-partner's lump sum - Table K_06

Pension credit benefits

The pension credit will be paid when the ex-partner reaches age 65, or immediately if the ex-partner is over age 65.

The ex-partner's pension credit will be subject to pension increases under the provisions of the Pensions (Increase) Act (Northern Ireland).

If the pension credit was calculated under the Calculation where the member is an active member or a deferred pensioner section, then the ex-partner will receive a lump sum when they reach age 65, or immediately if they are already aged over 65. The lump sum will be equal to the annual rate of the pension credit when it comes into payment multiplied by 4.

This section sets out the method and instructions for calculating the pension debit to be applied to the member's benefits following the issue of a pension sharing order by the Court:

• Where the member is a pensioner, the debit will apply to the member's own pension with immediate effect and also to the pension payable to a future surviving qualifying partner on the member's death.
• Where the member is a deferred pensioner, the debit will apply to the member's pension at the point when the pension becomes payable. A corresponding debit is also applied to the member's lump sum on retirement. The debit will also apply to the pension payable to a future surviving qualifying partner on the member's death.
• Where the member is still contributing to the scheme, the debit will be calculated assuming retirement at age 65, as if pensionable service terminated immediately before the transfer day (or assuming the pension commences immediately if the member is entitled to immediate benefits). If the member chooses to take their pension at an earlier age, the debit will be reduced. A corresponding debit is also applied to the member's lump sum on retirement. The debit will also apply to the pension payable to a future surviving qualifying partner on the member's death.

Note that if a member (whether an active, deferred or pensioner member at the date of the pension sharing order):

• takes their pension early due to ill health, and
• pension increases are not granted until age 55, and
• is still aged under 55 at the time their pension commences,

then the case should be referred to the DoJ.

Pension debit for current pensioner

For divorces in England and Wales and Northern Ireland, the pension sharing order will specify the percentage of the member's benefits that the ex-partner will be entitled to. For divorces in Scotland, the value of the cash equivalent to be shared will be specified, and the proportion will be calculated as described in the Calculation of the value of the shareable rights section.

The debit applying to the member's pension will be:

MEMDEB = CP x appropriate percentage / 100

The debit applying to any future surviving qualifying partner's pension will be:

SURDEB = SUR x appropriate percentage / 100

The debit applying to the GMP will be:

PREGMPDEB = PRE GMP x appropriate percentage / 100

POSTGMPDEB = POST GMP x appropriate percentage / 100

CP, SUR, PRE GMP and POST GMP are defined in the Cash equivalents on divorce: Members already in receipt of benefits section. The amounts should be the same as used to recalculate the cash equivalent of the member's benefits in the Calculation of the value of the shareable rights section.

Pension debit for a deferred pensioner

The principle is the same as for the pensioner, except that the debit will not start to be deducted until the member's benefits come into payment, and there is also a debit to be applied to the lump sum.

Subject to the Calculation of the pension debit section, debits are calculated by reference to the benefits at exit:

MEMDEB = Member's pension at exit x appropriate percentage / 100

LSDEB = Lump sum at exit x appropriate percentage / 100

SURDEB = Survivor's pension at exit x appropriate percentage / 100

PREGMPDEB = PRE GMP at exit x appropriate percentage / 100

POSTGMPDEB = POST GMP at exit x appropriate percentage / 100

At retirement, both the unreduced benefit and the debit should be revalued from the date of exit to the date of retirement, and the revalued debit should be deducted from the revalued benefit.

If the member's deferred pension and lump sum come into payment before age 65, whether on voluntary early retirement or on grounds of ill health, the debits applied should be reduced. This is because the debit will be applied over a longer period than was assumed in calculating the original amount of the debit, and so a lower amount should be deducted. The pension debit will be:

Member's pension debit = MEMDEB x PI x MEMERF

Member's lump sum debit = LSDEB x PI x LSERF

MEMDEB = pension debit to the member's pension at exit - see the formula above

LSDEB = pension debit to the lump sum at exit - see the formula above

PI = the pension increase uprating factor between the date of exit and the date of retirement

MEMERF = pension early retirement factor - Table Q1_06 or R1_06, as appropriate

LSERF = lump sum early retirement factor - Table Q2_06 or R2_06, as appropriate

Pension debit for an active member

The principle is that the debit acts as a negative deferred pension and lump sum that will be set against the member's benefits when they come into payment.

Subject to the Calculation of the pension debit section above, debits are calculated by reference to the benefits used to recalculate the cash equivalent as at transfer day:

MEMDEB = Member's pension used in cash equivalent calculation x appropriate percentage / 100

LSDEB = Lump sum used in cash equivalent calculation x appropriate percentage / 100

SURDEB = Survivor's pension used in cash equivalent calculation x appropriate percentage / 100

PREGMPDEB = PRE GMP used in cash equivalent calculation x appropriate percentage / 100

POSTGMPDEB = POST GMP used in cash equivalent calculation x appropriate percentage / 100

When the member retires, the total pension and lump sum are calculated in accordance with the regulations, initially ignoring the debits. The pension and lump sum are then reduced to allow for the debits. The debits should be revalued from the transfer day to the date of retirement.

If the member's pension comes into payment at the retirement age assumed in the recalculation of the cash equivalent then the appropriate amount to be deducted at retirement is the member's (revalued) debit. For members entitled to immediate benefits at the transfer day, the assumed retirement age is the age at the transfer day. For other members, the assumed retirement age is 65.

If the member's pension comes into payment at any time other than the assumed retirement age, the debit applied should be adjusted. This is to allow for the different period over which the pension debit will be deducted and the different date on which the lump sum debit will be deducted. Subject to the Calculation of the pension debit section above, the debits will be:

Member's pension debit = MEMDEB x PI x MEMRTF

Member's lump sum debit = LSDEB x PI x LSRTF

MEMDEB = pension debit at divorce - see the formula above

LSDEB = pension debit at divorce - see the formula above

PI = the pension increase uprating factor between the transfer day and the date of retirement

MEMRTF = pension retirement timing factor, see below

LSRTF = lump sum retirement timing factor, see below

The retirement timing factors depend on the member's age at retirement and the assumed retirement age used in the calculation of the cash equivalent.

For members with an assumed retirement age of 65:

MEMRTF = MEMERF_ret

LSRTF = LSERF_ret

For members entitled to immediate benefits at the transfer day:

MEMRTF = MEMERF_ret / MEMERF_trd

LSRTF = LSERF_ret / LSERF_trd

MEMERF_ret = pension early retirement factor at retirement age - Table Q1_06 or R1_06, as appropriate

LSERF_ret = lump sum early retirement factor at retirement age - Table Q2_06 or R2_06, as appropriate

MEMERF_trd = pension early retirement factor at member's age at the transfer day - Table Q1_06 or R1_06, as appropriate

LSERF_trd = lump sum early retirement factor at member's age at the transfer day - Table Q2_06 or R2_06, as appropriate

Pension debits - future partners

The benefits payable to a new spouse, civil partner or other qualifying partner who is eligible for a pension on the member's death should be reduced by the survivor's pension debit, revalued using the pension increase uprating factors.

No qualifying partner's benefits will be payable to the person who was party to the divorce resulting in the pension sharing order (except in the unlikely situation that the member remarried or entered into a new qualifying partnership with his or her ex-partner).

Pension debits - GMP debits

At the member's GMP Payment Age (or later retirement date) the GMP debit, calculated in the appropriate section above, should be increased to the member's GMP Payment Age (or later retirement date). All increases should be allowed for, including the late retirement increase of 1/7 of a percent (i.e. 1/700) a week if appropriate. The revalued debit should be deducted from the member's full GMP.

Pension debits - other benefits

No debit will be applied to a child's pension.

No debit will be made to the lump sum death grant payable to police officers who were contributing to the scheme at their death.

For the purpose of determining aggregate pension contributions under the Regulations for the purposes of repayment (and for the purpose of determining death gratuities payable) the member's aggregate pension contributions paid before the effective date of the pension share should be reduced by a debit equal to the percentage ordered by the Court, or as calculated in the Calculation of the value of the shareable rights section.