Where a member who has made a monthly contribution election (to purchase AP) ceases to be in pensionable employment before the end of the payment period, the member may pay a lump sum to the NITPS in order to be credited with the amount of the AP specified in the original election.
The method for calculating the lump sum is set out in the following three steps.
Step 1: Determine the remaining AP not yet purchased at the election date, based on the contributions made over the actual payment period.
Remaining Pension = Original AP - C
Where C is calculated using the approach set out in "Methodology for paid-up AP credit calculations".
Step 2: Increase the remaining AP not yet purchased in line with inflation between the election date and the calculation date (i.e. the date monthly contribution election ceases).
Revalued Pension=Remaining Pension x Infl
Where Infl is calculated as follows for the final salary section or career average section
Calculation of Infl - Final salary sections
If the original election date was after 22 June 2010, then Infl should be calculated as
Infl = CPI1 / CPI2
Where:
CPI1 is the consumer prices index (CPI) for the penultimate month before the month of the calculation date, and
CPI2 is the CPI for the month of the original election.
If the original election date was on or before 22 June 2010 then RPI should be used in place of CPI.
Calculation of Infl - Career average section
Infl = (1 + PIA)
Where PIA is the cumulative increase that would have been awarded under the Pensions (Increase) Act between the election date and the calculation date if the pension was eligible to be increased.
Step 3: Multiply the revalued pension by the lump sum cost of purchasing AP for the member at the calculation date.
Lump Sum = L = (Revalued Pension x F) / £250
Where F is the factor for the lump sum cost of purchasing £250 of AP, at member's age last birthday at the calculation date.
If the original election date is on or before 22 June 2010, SR60 or SR65 tables should be used. Otherwise the factors for lump sum elections in S65, S66, S67 and S68 should be used, unless the original election date is after 22 June 2010 and the member originally purchased additional pension subject to NPA60 through a monthly contribution, in which case please refer to GAD.
