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 STSS or STPS 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
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 (ie the date monthly contribution election ceases).
Where:
Infl is calculated as follows for a final salary section or career average section:
Calculation of Infl - STSS
If the original election date was on or after 1 April 2011, then Infl should be calculated as
Infl = CPI1 / CPI2
Where:
CPI1 is the CPI for the penultimate month before the month of the calculation date.
CPI2 is the CPI for the month of the original election.
If the original election date was before 1 April 2011 then RPI should be used in place of CPI.
Calculation of Infl - STPS
Infl should be calculated as
Infl = 1 + PIA
Where:
PIA is the cumulative increase that would have been awarded under the Pensions (Increase) Act 1971 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 lump sum cost of purchasing £250 of AP, at member's age last birthday at the calculation date. If the original election date is before 1 April 2011, Tables 720 to 721 should be used. Otherwise Tables 702 to 705 should be used (unless the original election date is on or after 1 April 2011, and the member originally purchased additional pension subject to NPA60 through a monthly contribution, in which case please refer to GAD).
