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 2015 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 2015 Scheme benefits, or either party has 1988 or 2006 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.

Calculation Date

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.

Selection of factors

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.

Benefits to be valued

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 below for members in receipt of scheme benefits and the Transfer values on transfers out of the 2015 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

Historically, 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, 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 calculations for these cohorts of members, not applying the GMP adjustment factors will slightly 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_15 : Pensioners who retired on ordinary grounds
• Table H_15 : Pensioners who retired with ill health benefits.

The main difference between Table G_15 and Table H_15 is that Table H_15 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_15 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 should be calculated as follows:

Transfer value = (CP x F_p) + (SUR x F_sur) - ([PRE GMP + (G_post88 x POST GMP)] x F_{Pre GMP})

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

SUR = pension payable on the death of the member to their spouse or partner, description of this item can be found below, 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_15, G2_15, H1_15 or H2_15

F_sur = factor for survivor's pension - Table G1_15, G2_15, H1_15 or H2_15

F_{Pre GMP} = factor for GMP saving accrued before 6 April 1988 - Table G1_15, G2_15, H1_15 or H2_15

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 if the member had 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 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 2015 scheme section.

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 1987 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 1987 scheme section also applies to the cash equivalent value. (That is, the underpins set out 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 above. 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_15_xx (where xx is the State Pension age of the ex-partner) set out the factors needed to calculate the pension credit for the ex- partner, depending on their State Pension age.

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.

The pension credit should be calculated as:

Pension credit = ESCE / F_p

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

F_p = factor for ex-partner pension - Table K_15_xx, where xx is their State Pension age

Where an ex-partner has a non-integer normal pension age, then factors should be interpolated using the same method as used for calculating transfer payments for the purposes of The Public Sector Transfer Club. See the Non-Integer NPAs section in Transfer values on transfers out of the 2015 scheme section for further details.

For the avoidance of doubt, if the State Pension age changes, the pension credit will become payable from the revised State Pension age. There will be no adjustment to the pension credit in respect of such a change, it should be treated as if the new State Pension age had applied at the time of the calculation.

The pension credit will be paid when the ex-partner reaches their State Pension Age, or immediately if the ex-partner is over their State Pension Age.

The ex-partner's pension credit will be subject to pension increases under the provisions of the Pensions (Increase) Act (Northern Ireland) 1971.

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. The debit is calculated assuming that the member will retire at State Pension Age. If the member chooses to take their pension at an earlier age, the debit will be reduced. 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 the member's State Pension Age, 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. 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.

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.

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.

Subject to the exception noted in the Calculation of the pension debit section above i.e. cases involving members retiring early due to ill health where pension increases are not granted until age 55 and the member is under 55 when their pension commences, debits are calculated by reference to the benefits at exit:

MEMDEB = Member's pension 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 comes into payment before State Pension Age, whether on voluntary early retirement or on grounds of ill health, the debit 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 debit on retirement (early) = MEMDEB x PI x MEMERF

MEMDEB = pension debit to the member's pension at exit - calculated using the formulae described above (pension debit at exit) see the Pension debit for a deferred pensioner section

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

MEMERF = pension early retirement factor - Table Q_15 or R_15, as appropriate

For the avoidance of doubt, if the State Pension age changes, the debit will become payable from the revised State Pension age. There will be no adjustment to the debit in respect of such a change, it should be treated as if the new State Pension age had applied at the time of the calculation.

The principle is that the debit acts as a negative deferred pension that will be set against the member's pension when it comes into payment.

Subject to the exception noted in the Calculation of the pension debit section above, debits are calculated by reference to the benefits used to recalculate the cash equivalent:

MEMDEB = Member's pension 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 is calculated in accordance with the regulations, initially ignoring the debits. The pension is 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 their State Pension Age.

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 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.

Subject to the Calculation of the pension debit section above, the debit will be:

MEMDEB x PI x MEMRTF

MEMDEB = 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 the formula 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 equal to their State Pension Age:

MEMRTF = MEMERF_ret

For members entitled to immediate benefits at the transfer day:

MEMRTF = MEMERF_ret / MEMERF_trd

MEMERF_ret = pension early retirement factor at retirement age - Table Q_15 or R_15, as appropriate

MEMERF_trd = pension early retirement factor at member's age at the transfer day - Table Q_15 or R_15, as appropriate

For the avoidance of doubt, if the State Pension Age changes, the debit will become payable from the revised State Pension Age. There will be no adjustment to the debit in respect of such a change, it should be treated as if the new State Pension Age had applied at the time of the calculation.

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).

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.

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 the reduction in pension debit member's benefits the relevant benefits should be reduced by the percentage ordered by the Court, or as calculated in the Calculation of the value of the shareable rights section above.