The following information relates to those with at least two years Qualifying Service. If you have at least two years Qualifying Service and you are an Active Member of the 2015 Scheme you will be able to retire from age 60 with an immediate pension or from age 55 but your benefits will be subject to an early retirement reduction. An Active Member who intends to retire must claim payment of the pension, giving written notice of at least one month.
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.
Basic salary, London weighting, increase in pay on temporary promotion, temporary salary (Competency Related Threshold Payments was pensionable until it was phased out in April 2016). Allowances are not pensionable.
For each Scheme Year during which you are an Active Member of the 2015 Scheme the amount of earned pension you accrue is 1/55.3th of your Pensionable Earnings for that year. This goes into your pot of earned pension, which builds up each year as more earned pension is added. The amount of accrued earned pension in the pension pot is uprated each year in line with CPI + 1.25% whilst you are still an Active Member and in line with CPI after you leave the 2015 Scheme. The retirement earned pension payable to you from the 2015 Scheme is calculated based on the amount of accrued earned pension in the pension pot when you retire.
Option to commute part of the pension for a lump sum
If you become entitled to 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 lump sum. This is known as commutation. If you decide to exercise this option, for every £1 by which the amount of your annual rate of retirement pension or ill health pension is reduced, you will be paid a lump sum of £12. Your commutation lump sum cannot be more than 25% of the value of your pension.
If you wish to exercise this option to commute some of your pension for a lump sum you will have to provide written notice to your Police Pension Authority. Please note that the decision to commute your pension to lump sum will have to be taken before the date of your retirement.
Please see the examples tab above for an example of how your pension benefits will be calculated.
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 as an Active Member is calculated as follows:
Pensionable Earnings over the year: £21,000
Earned Pension pot at end of Year 1: £379.75 = £21,000 ÷ 55.3
Assume that in the next year, Pensionable Earnings for this member increase by 1% to £21,210, and that over the last year price inflation (as measured by CPI) increased by 2%. His/her total pension in the second Scheme Year will then be calculated as shown is example 2.
As s/he has remained an Active Member, his/her accrued earned pension pot from the previous year will increase in line with CPI + 1.25% at the start of the Scheme Year (as CPI growth was 2%, this would result in an increase of 3.25%):
Increased Year 1 earned pension pot: £392.09 (= £379.75 × 1.0325)
His/her accrued earned pension over this year is then calculated as per Year 1:
Pensionable Earnings over the year: £21,210 (= £21,000 × 1.01)
Addition to earned pension pot: £383.5 = (£21,210 ÷ 55.3)
His/her total earned pension accrued at the end of Year 2 is the sum of the increased Year 1 earned pension pot and the earned pension accrued over the second year:
Total earned pension pot at end of Year 2: £775.63 (= £392.09 + £383.54)
This process continues for each Scheme Year during which s/he remains an Active Member (assuming that s/he remains an Active Member for 30 years). The below shows what happens to the earned pension over the last year during which s/he is an Active Member.
If his/her Pensionable Earnings continue to grow at 1% per year, and CPI growth stays at 2% per year throughout his/her career his/her total earned pension pot at the end of year 29 will be £20,146.80.
Increased Year 29 earned pension pot: £20,801.57 (= £20,146.80 × 1.0325)
His/her accrued earned pension in Year 30 will then be calculated as follows:
Pensionable Earnings over the year: £28,024.58 (= £21,000 × 1.0129
Addition to earned pension pot: £506.77 = (£28,024.58 ÷ 55.3)
Total earned pension pot at end of Year 30: £21,308.34 (= £20,801.57 + £506.77)
In the April following retirement the total earned pension accrued at retirement will increase in line with CPI + 1.25% to around £22,000 per year. After that, the earned pension will increase in line with CPI throughout the period of payment.
At retirement, the member has the option to commute pension for lump sum at a rate of £12 of lump sum for every £1 of pension given up. The commutation lump sum cannot be larger than 25% of the value of the member's pension.
For example, if the member was to commute 25% of the pension income, the lump sum would be: £63,925.02 (=25% x £21,308.34 × 12)
plus a revised pension at retirement of: £15,981.26 (=75% × £21,308.34).
In the 1987 Scheme a member's pension scheme membership over 20 years is doubled e.g. the pension for a member with 30 years' service in the 1987 scheme would be calculated at 40/60ths (20+10+10). This is more commonly known as double accrual.
Service in the 2006 Scheme does not attract any enhancement and pensions are capped at 35/70ths. Pensions in the 2015 Scheme are not capped and are calculated at 1/55.3ths of pay.
The new regulations give members who move from the 1987 Scheme into the 2015 Scheme a proportion of the double accrual they could have expected to receive had they remained in the 1987 Scheme. Full continuous pensionable service (i.e. pre and post 2015 Scheme membership) is taken into account to calculate the benefits to be awarded under the 1987 Scheme.
A full example can be seen by viewing the link below: