This section sets out how to calculate statutory (non-Club) Cash Equivalent Transfer Values (CETVs) from the 2015 Scheme.
Members of the 2015 Scheme are generally entitled to take a transfer value to another pension arrangement. Where the new pension scheme is another scheme that does not participate in the Public Sector Transfer Club, the transfer will normally be effected on the non-Club terms set out in this note.
The Police Pensions Regulations (Northern Ireland) 2015 define the circumstances under which a member is entitled to take a transfer value. Members with over three months of service would generally be entitled to a transfer value. Members with less than two years of qualifying service would normally be entitled to a refund of contributions. Members with between three months and two years of service would generally have a choice between a transfer value and a refund of contributions.
Following the requirement to equalise GMPs, the calculation methodology does not contain a GMP adjustment for members reaching State Pension age after 6 April 2016.
When the CETV Factors change, we understand that the usual transitional arrangements in place for the scheme apply i.e. transfer quotes are calculated using factors effective at that time. Therefore, where calculations are carried out before the implementation date of the revised CETV factors, we would expect the following to apply:
- If the member replies within the guarantee period and before the implementation date, the original quote is honoured.
- If the member replies within the guarantee period but after implementation date, calculations on revised factors are compared with the original calculation and the approach most beneficial to member is used.
- If the member replies outside of the guarantee period, the CETV is recalculated.
Any current cases where a CETV is required for a member reaching State Pension age before 6 April 2016 should be referred to GAD.
The relevant date for calculating a transfer value is the 'guarantee date' as defined in the regulations. Typically, it must be within 3 months (or exceptionally 6 months) of the date of the member's application.
A transfer value should be guaranteed for three months from the guarantee date. If a request to pay the transfer value is made within three months of the guarantee date, it will not be necessary to recalculate the transfer value.
The benefits to be valued for serving police officers are those that would be payable if the member had left service on the date of the calculation - either deferred benefits or the payment of immediate benefits. For a member with less than two years of service the benefits valued are the deferred benefits that would be payable if there were not a two-year qualifying period for deferred benefits.
The benefits to be valued for a deferred member seeking a transfer out of the scheme should include revaluation to the guarantee date. The accrued pension benefits should be calculated at the last day of service, and then increased in line with the 2015 scheme regulations. Any Guaranteed Minimum Pensions (GMPs) should be increased in line with the Revaluation of Earnings (Section 148) Orders.
Members not entitled to immediate benefits
The formula below should be used for all other members: that is, for those members who are not entitled to immediate benefits. This includes deferred and active members who are entitled to deferred benefits from their State Pension Age.
Transfer value = (CP x Fp) + (SUR x Fsur)
CP = member's pension
SUR = pension payable on the death of the member to their surviving partner
Fp = factor for member's pension - Table NA1_15_xx or NA2_15_xx (from the consolidated workbook), where xx is the member's State Pension Age
Fsur = factor for survivor's pension - Table NA1_15_xx or NA2_15_xx (from the consolidated workbook), where xx is the member's State Pension Age
Active members entitled to immediate benefits
For active members who are entitled to immediate benefits (such as those aged over 60), the transfer value should be calculated using the following formula:
Transfer value = (CP x Fp) + (SUR x Fsur)
CP = member's pension
SUR = pension payable on the death of the member to their surviving partner
Fp = factor for member's pension -Table NF1_15 or NF2_15 (from the consolidated workbook)
Fsur = factor for survivor's pension -Table NF1_15 or NF2_15 (from the consolidated workbook)
Non-Integer NPAs
Where a member has a non-integer normal pension age, then factors should be interpolated.
For a member with a normal pension age of n years and m months the main pension factor would be:
Fp (NPA n years, m months) = Fp (NPA n) + (m / 12 x [Fp (NPA n + 1) - Fp (NPA n)])
Where:
Fp(NPA xx) is the factor applying for a Normal Pension Age of xx
A member may have a normal pension age that falls on a specified date. This may mean that their NPA is based on years and days rather than years and whole months. For such a member the main pension factor would be:
Fp (NPA n years, m days) = Fp(NPA n) + {m / 365 x [Fp(NPA n + 1) - Fp(NPA n)]}
Where:
Fp(NPA xx) is the factor applying for a Normal Pension Age of xx
Members with a pension debit
If a pension debit member requests a statutory CETV, the quotation given should be based on the pension benefits after the debit.
The transfer value should be calculated in two stages:
- Firstly, a gross transfer value should be calculated at the guarantee date ignoring the pension debit.
- Secondly, the pension debit should be revalued to the guarantee date and the value of the pension debit should then be calculated (i.e. the transfer value of a deferred pension of the same amount as the debit).
The results of both calculations should be passed to the receiving scheme. The transfer value paid is the net amount: the gross transfer value less the value of the pension debit.
If the member has received a transfer in of benefits from another scheme, then an underpin applies to the CETV. The underpin is calculated using the following formula:
Underpin = TVActSer + TVin
Where:
TVActSer = the transfer value based on actual service, calculated in accordance with the paragraphs below
TVin = the value of the previous transfer in, calculated in accordance with the paragraphs below
The transfer value based on actual service (TVActSer) in the 2015 scheme is calculated in the same way a standard non-Club transfer value is calculated, but the value of the benefits is based on accrued pension in the 2015 scheme ignoring any pension credit in respect of the previous transfer in. The member's pension (CP) and the pension payable on the death of the member to their spouse or partner (SUR) should be the amounts accrued within the 2015 scheme. Then TVActSer can be calculated using the appropriate formula set out in the Calculation of the transfer value section above, as appropriate.
The value of transferred in service TVin is usually the amount of the previous transfer value received by the police authority but there are some exceptions. The value to use for different types of transfer in are as follows:
- Where the transfer in was a statutory CETV (i.e. non-Club) transfer, TVin is the transfer value that was received.
- Where the transfer in was a Club transfer, TVin is the transfer value that was received.
- Where the transfer in was from a bulk transfer into the 2015 scheme, TVin is the CETV that would have been available from the member's previous scheme at the date of transfer.
If more than one transfer in has been received, TVin should be the sum of the specified figures for all the transfers received.
If the underpin calculated above is greater than the transfer value calculated using the appropriate formula in the Calculation of the transfer value section above, then the transfer value should be increased so that it equals the underpin.
The value of post-1997 contracted-out rights (known as section 9(2B) rights) may need to be shown separately on the transfer value statement.
If the underpin described above applies, then the value of section 9(2B) rights is the sum of:
- the transfer value based on actual service on and after 6 April 1997
- the part of any transfer value received which related to section 9(2B) rights.
If the transfer value calculated using the appropriate formula in the Calculation of the transfer value section is less than the member's aggregate pension contributions (without interest) then the transfer value should be increased so that it equals the aggregate contributions.
If the member has previously received a transfer in of benefits from another scheme, then the underpin in relation to that transfer in applies (as described in the Underpin in respect of previous transfer in section above). In this circumstance, the member contribution underpin applies to the calculation of TVActSer (as defined in the Underpin in respect of previous transfer in section above), and not to the sum of TVActSer + TVin.
Previous versions of this guidance note included calculation methodology to allow administrators to value the accrued GMP, typically for use in cases where the value of the GMP was to be quoted separately or liability for the GMP was to be retained within the 2015 scheme. Factor table Table N_15 was provided for this purpose but was withdrawn at a previous factor review. We understand that there is no longer a requirement to provide the value of the GMP on transfer values and therefore we have not included the calculation methodology or factors in this guidance. Please contact GAD if a GMP value is required for a particular case.
