Option to buy out the early payment reduction
If you have reached normal minimum pension age and you are entitled to claim your pension early and you are either an active member who has not reached normal pension age or a deferred member who has not reached your State Pension age, 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, your employer or shared between you and your employer.
Your employer may make a special payment using a lump sum which is payable to you under the Compensation Scheme. However if your employer does make a special payment, the lump sum which you would have received under the Compensation Scheme will be reduced by the amount of special payment provided by your employer.
However, if the special payment is more than the whole lump sum you would receive under the Compensation Scheme, you will not be charged for the difference.
The cost of buying out the early payment reduction will be determined by the Police Pension Authority in accordance with actuarial guidance.
Added pension option
You may opt to make added pension payments in order to increase:
- your retirement benefits for a period of service
- your retirement benefits and death benefits for a period of service
If you choose to exercise this option you will be able to decide whether the added pension payments are to be made periodically or with a lump sum.
You will only be able to exercise the lump sum option if you have been an active member of the 2015 Scheme for a continuous period of at least 12 months and you have been provided with a statement of the amount of added pension.
Please note that you may also use the whole or part of a lump sum which would have been payable to you under the Compensation Scheme as a lump sum payment to buy added pension but you will need to specify this option to your Police Pension Authority.
You will be able to exercise the added pension option more than once but you can only choose to make a lump sum payment for added pension once in any scheme year.
The maximum amount of added pension that can be purchased for any scheme year is reviewed annually by HM Treasury. For the scheme year 1 April 2015 to 31 March 2016 the maximum amount of added pension that could be purchased was £6,500.
For scheme years since the 1 April 2016, the limit has been and will continue to be determined by HM Treasury but may effectively increase in line with CPI. Please contact Peninsula Pensions for the current maximum amount.
If you decided to make periodic payments for added pension, the Police Pension Authority may cancel the added pension option if it appears that the added pension limits will be exceeded if you continue to make those periodic payments.
Option to defer payment of retirement added pension
If you become entitled to payment of a retirement added pension you may opt to defer payment of that pension. If you decide to do so you will become a deferred member in respect of the retirement added pension.
You will then be entitled to payment of the retirement added pension from the date you specify when you claim payment of that pension. You may claim payment of that pension by giving your Police Pension Authority at least one month’s notice.
The annual rate of your retirement added pension will be calculated in accordance with the Police Pensions Regulations 2015.
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.
Example
A member is about to retire with a pension of £20,000. S/he wants to commute 20% of his/her annual pension into lump sum.
S/he would be eligible for a lump sum of £48,000 (=20% x £20,000 x 12) and a revised pension at retirement of £16,000 (=80% x £20,000).
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.