The formula below showing the Outstanding Lump Sum calculation should be used for cases arising under the regulations when contributions are due in respect of all of the remaining contribution period. We have included a brief outline of the types of cases relating to the regulations but the scheme's administrator will need to ensure that cases are processed in accordance with the correct regulations. The cases include:
- Members making PAY contributions ceasing to hold their employment before age 60.
- Members making PAY contributions ceasing to hold their employment after reaching age 60.
- Members paying additional family benefit contributions dying, or becoming entitled to the payment of retirement benefits, after reaching their normal pension age.
- Members paying additional family benefit contributions retiring on premature retirement grounds.
The following formula should be used to calculate the appropriate lump sum payment or deduction from a member's benefits when contributions are due in respect of all of the remaining contribution period:
Outstanding Lump Sum = C x FN x P
where,
- C is the additional contributions expressed as percentage of salary.
- FN is the capitalisation factor for N outstanding years of contributions at the calculation date (subject to the below paragraph) from Table 901 (Table 803 in Consolidated Factors Workbook). The capitalisation factor depends only on the number of outstanding years of contributions and not on the member's age.
- P is the pensionable salary at the calculation date (full-time equivalent for part-time members).
If the member has a period of outstanding contributions which is not a whole number of years, the capitalisation factor (FN) should be interpolated using the factors provided in Table 901 (Table 803 in Consolidated Factors Workbook). In the following formula.
FN = Fa + [(S / 12) x (Fb - Fa)]
where,
- S is the number of months between: the actual outstanding contribution period at the calculation date; less the outstanding contribution period rounded down to nearest whole year
- Fa is the capitalisation factor for the outstanding contribution period rounded down to the nearest whole year
- Fb is the capitalisation factor for the outstanding contribution period rounded up to the nearest whole year
In line with the formula above, full-time equivalent pensionable salary should be used in place of actual pensionable salary for part-time members. Part-time members can only elect to complete the payment of outstanding contributions as if they had been in full-time employment from the date they left pensionable service to the end of the contribution period.
The Outstanding Lump Sum 60 formula below should be used for cases arising under the Regulations when contributions are only due in respect of the contribution period after a member's 60th birthday. We have included a brief outline of the types of cases relating to these regulations but the scheme's administrator will need to ensure that cases are processed in accordance with the correct regulations. The cases include:
- Members making PAY contributions retiring on ill-health grounds before reaching age 60.
- Members paying additional family benefit contributions dying before reaching their normal pension age or retiring on ill-health grounds before reaching their normal pension age.
The Outstanding Lump Sum 60 formula below should not be used for cases arising under the regulations for mixed service members who have some benefits with a normal pension age of 65. These cases are not covered by this guidance and should be referred to GAD.
The following formula should be used to calculate the appropriate lump sum payment or deduction from a member's benefits when contributions are only due in respect of the contribution period after a member's 60th birthday:
Outstanding Lump Sum 60 = C x HxN x P
where,
- C is the additional contributions expressed as percentage of salary.
- HxN is the capitalisation factor for N outstanding years of contributions beyond age 60, for a member aged x (in years and complete months) at the calculation date (subject to the paragraphs below) from Table 911 (Table 804 in Consolidated Factors Workbook).
- P is the pensionable salary at the calculation date (full-time equivalent for part-time members).
The capitalisation factor should be chosen with reference to both the number of outstanding years of contributions and the member's age (in completed years and months) at the calculation date.
Where the member has a period of outstanding contributions after their 60th birthday that is not a whole number of years from the calculation date, the appropriate capitalisation factor should be interpolated from the factors provided in Table 911 (Table 804 in Consolidated Factors Workbook) using the following formula.
HxN = Ha + [(T / 12) x (Hb - Ha)]
where,
T is the number of months between; the actual outstanding contribution period beyond age 60 at the calculation date; less the outstanding contribution period beyond age 60 rounded down to nearest whole year
Ha is the capitalisation factor for the outstanding contribution period beyond age 60 rounded down to nearest whole year, for a member aged x
Hb is the capitalisation factor for the outstanding contribution period beyond age 60 rounded up to nearest whole year, for a member aged x
In line with the formula above, full-time equivalent pensionable salary should be used in place of actual pensionable salary for part-time members. Part-time members can only elect to complete the payment of outstanding contributions as if they had been in full-time employment from the date they left pensionable service to the end of the contribution period.
