Calculating your Benefits
The FPS 2007 is a final salary pension scheme which means that your pension will equate to a proportion of your final pensionable pay. The proportion will depend, in part, upon how much pensionable service you have at the time of leaving the scheme. For each year of pensionable service, you will get 1/60th of your final pay in return as an annual pension.
In other words, as a whole-time or part-time firefighter, each day of pensionable service will count as 1/365th of 1/60th. For example, if you retire at age 60 with 35 years 28 days of pensionable service and a final pensionable pay of £32,000, your pension would be assessed as;
35 years 28/365 days x 1/60th x £32,000 = £18,707.58 annual pension
You will also have the option when you retire to exchange some of your pension to gain a tax-free lump sum.
What if I work as a Retained Firefighter?
If you are a retained firefighter, the principles concerning the calculation of your benefits will be different to those mentioned above, due to differences in pensionable pay and the absence of contractual hours.
This is your period of service as a member of the FPS 2007 and in respect of which you have paid contributions. If your hours of employment are less than whole-time, the calendar length service will be proportioned to reflect your part-time hours.
For example, if you work half-time and have completed 6 calendar years of service, your pensionable service will be 3 years.
Various other periods may count as pensionable service e.g. that credited on receipt of a transfer value from another pension arrangement, or unpaid leave (including additional maternity and adoption leave) where you have paid contributions. Also, service purchased where you have paid contributions to improve retirement benefits counts.
In most cases, your pensionable pay will be an average over the last 365 days of pensionable service. However, if either of the two preceding years would produce a greater amount, the final pensionable pay from one of those years could be substituted.
If your hours of employment are less than whole-time, although your pensionable service will be proportioned to reflect your hours, the final pensionable pay used in the calculation of your benefits will be your whole-time equivalent pensionable pay.
Normally the 'best of the last 3 years' principle will cater for any fluctuations in pay leading up to retirement.
Exchanging your Pension
If, on retirement, you prefer to have a lump sum as well as a pension, you can provide for one by exchanging a part of your pension, otherwise known as Commutation.
Before your pension is due to come into payment, you will be given this option and will therefore have to deicide whether you wish to commute, and if so, how much pension you would like to convert into a lump sum. This can be up to 25% of the value of your pension. You would receive £12 as a lump sum for each £1 of pension that you commute.
If you were entitled to an annual pension of £16,000, you could commute up to £4,000. This would leave you a pension of £12,000 and provide a lump sum of £48,000 (£4,000 x 12 = £48,000).
If you are a retained firefighter, your pension benefits are calculated by using the same formula as for a regular firefighter, but the way in which your pensionable service is calculated is different.
The basic formula applied in the assessment of your pension is:
Pensionable Service x 1/60th x Final Pay
Your final pay is the level of pay that you would have received, had you been serving as a whole-time firefighter. If your pay has been reduced, it's likely that your final pay will be based on the best year's pay within the last 3 years of employment.
Your pensionable service is worked out with reference to your pay. The pensionable pay that you have actually received from 1 April to 31 March is compared with the full-time equivalent rate (FTE) of pay for your role.
A retained firefighter has worked for 3 years, from 1 April 2017 to 31 March 2020. The full-time equivalent level of pay for his/her role over the same 3 year period is:
- 1 April 2017 to 31 March 2018 - £24,000
- 1 April 2018 to 31 March 2019 - £26,000
- 1 April 2019 to 30 March 2020 - £28,000
The actual pay received by the firefighter was:
- 1 April 2017 to 31 March 2018 - £6,500
- 1 April 2018 to 31 March 2019 - £4,000
- 1 April 2019 to 30 March 2020 - £8,500
The pensionable service is then calculated as:
- 1 April 2017 to 31 March 2018 - £6,500/£24,000 = 0.2708 of a year
- 1 April 2018 to 31 March 2019 - £4,000/£26,000 = 0.1538 of a year
- 1 April 2019 to 30 March 2020 - £8,500/£28,000 = 0.3036 of a year
Total pensionable service = 0.7282 of a year
With a final pay of £28,000, the pension benefits are therefore calculated as:
0.7282 x 1/60th x £28,000 = £339.82 annual pension