Calculating your Benefits
If you have at least 2 years’ qualifying service and you are an active member of the 2015 Scheme, you will be able to retire from NPA (or from NMPA, but subject to actuarial reduction) with the immediate payment of a retirement pension. An active member who intends to retire must claim payment of the pension, giving at least 1 month’s written notice.
Qualifying service means the calendar length of any continuous period of pensionable service under the 2015 Scheme (not including any gap in service, any career break or any other period of unpaid leave), plus any previous pensionable service or employment which you have transferred into the 2015 Scheme and, if applicable, your period of pensionable service under the 1987 Scheme or the 2006 Scheme.
Your pensionable service under the 2015 Scheme includes:
- Your current service as an active member during which you have paid pension contributions to the 2015 Scheme, or in which you are assumed to receive Pensionable Earnings (e.g. any unpaid period in the first 26 weeks of maternity leave).
- Earlier service as an active member in the same Force, or in another Police Force in England and Wales, provided that you did not have a gap in service exceeding 5 years before beginning service under the 2015 Scheme and contributions were not refunded to you in respect of your earlier service.
- Earlier service under the 2015 Scotland Police Pension Scheme or the 2015 Northern Ireland Police Pension Scheme provided you did not have a gap in service exceeding 5 years before beginning service under the 2015 Scheme and contributions were not refunded to you under the 2015 Northern Ireland Police Pension Scheme or the 2015 Scotland Police Pension Scheme.
- Periods of ‘relevant service’ under Section 97 of the Police Act 1996 (this includes appointments to the Inspectorate of Constabulary and certain types of overseas service) during which you have paid contributions under the 2015 Scheme (members contemplating overseas service are recommended to seek advice on the pension position before agreeing to undertake it).
If you have pension benefits in the scheme of a former employer, or in a personal pension plan, you may be able to transfer them into the 2015 Scheme.
Basic salary, London weighting, increases in pay on temporary promotion, temporary salary and Competency Related Threshold Payments (the latter to be phased out by April 2016) count towards Pensionable Earnings. However, allowances are NOT pensionable.
For the purposes of calculating your CARE pension, Pensionable Earnings include:
- The assumed pay for any paid element of any period of maternity leave (and any unpaid maternity leave within the first 26 weeks), paid adoption leave or other paid parental leave provided that you have not opted out of the 2015 Scheme during this period.
- The pay taken to apply to any periods of unpaid leave (sick leave, unpaid maternity leave, unpaid adoption leave, unpaid maternity support leave, unpaid adoption support leave and unpaid parental leave) for which pension contributions have been bought back;
- Pay during any period of ‘relevant service’ as defined under s.97 of the Police Act 1996 for which pension contributions have been paid.
When you retire, you will receive an annual pension payable for your lifetime. For each Scheme Year during which you are an active member of the 2015 Scheme, your pension build up is 1/55.3th of your Pensionable Earnings for that year, which is then added into your pension account.
The value of your pension account is uprated each year in line with CPI + 1.25% whilst you are still an active member, in line with the CPI after you leave the 2015 Scheme. The pension payable to you when you retire from the 2015 Scheme is therefore based on the total value of your pension account.
A 30 year old active member works full-time and earns £21,000 per year. His/her earned pension accrued over his/her first Scheme Year (1 April to 31 March) as an active member is calculated as follows:
£21,000 / 55.3 = £379.75
Assume that in the next year, the member’s pensionable earnings have increased by 1% to £21,210, and that over the last year the Consumer Price Index (CPI) increased by 2%. His/her total pension in the second Scheme Year will then be calculated as follows.
As s/he has remained an active member, the value of his/her pension account from the previous year will increase in line with CPI + 1.25% at the start of the next Scheme Year (as CPI growth was 2%, this would result in an increase of 3.25%) - £392.09 (£379.75 + 3.25%).
His/her accrued earned pension over this year is then calculated as:
£21,210 / 55.3 = £383.54
Total value of his/her pension account at the end of Year 2 is £775.63 (£392.09 + £383.54).
If you work on a part-time basis, the earnings that count towards your pension will be proportionately less than if you worked full-time. If you work full-time or part-time, your pension is accrued in the same way.
Exchanging your Pension
If you become entitled to the payment of a retirement pension, a deferred pension or an ill-health pension under the 2015 Scheme, you may opt to give up part of your pension for a tax-free lump sum. This is known as Commutation.
If you do decide to commute, you will receive £12 of tax-free lump sum in return for every £1 annual pension you decide to give up. However, your commuted lump sum CANNOT exceed more than 25% of the value of your pension.
A member is about to retire with a pension of £20,000. S/he wants to commute 20% of his/her annual pension into a tax-free lump sum. S/he would be eligible for a lump sum of £48,000 (£20,000 x 20% x 12) and a revised pension of £16,000 (£20,000 x 80%).
If you wish to commute some of your pension for a tax-free lump sum, you will have to provide written notice to your Police Force.
The decision to commute your pension to lump sum will have to be made before the date of your retirement.
If you have reached your NMPA and you are entitled to claim your pension early, and you are either an active member who has not reached NPA, or a Deferred member who has not reached your SPA, you may opt to buy out the 'actuarial reduction' which would have otherwise applied in the calculation of your annual pension.
If you choose to do this, the payment to buy out the actuarial reduction may be made by you, the Police Force or shared between you and your Force. The cost of buying out the early payment reduction will be determined by the Police Force in accordance with actuarial guidance.