Each year we update our actuarial calculations to reflect any changes in financial conditions. We take into account external influences, such as movements in financial markets and changes to life expectancy.
These retirement factors affect the options you may choose to take (such as a tax-free cash lump sum and early or late retirement). Figures could also change if the information we hold about you is incorrect.
Due to recent changes in financial markets, we have reviewed our factors again and made some necessary changes to our calculations. These changes will come into effect for anyone retiring on or after 1 October 2023.
Depending on when you retire, the new factors will have a different impact on what you receive.
Normal Pension Age
Starting your payments at your normal pension age with a tax-free lump sum will result in a smaller lump sum for the same amount of annual compensation given up.
Taking early retirement, before your normal pension age, will result in a lower level of compensation each year than using the current factors.
We’ve decided to introduce different early retirement factors for pre and post-97 service to bring them in line with the treatment of late retirement and other factors. This will produce more accurate calculations for you, and the impact is more significant now because of high levels of inflation.
Any compensation relating to pensionable service after 5 April 1997 will increase once in payment, whereas compensation relating to service before 6 April 1997 will not. As a result, the reduction for retiring early will be greater if more of your compensation relates to service after 5 April 1997, because you’ll be receiving an increasing benefit for longer. It will be smaller if more of your compensation relates to service before 6 April 1997, because the compensation won’t increase in payment.
If you plan to take a lump sum alongside early retirement, the new factors will result in a smaller lump sum and a lower level of compensation each year.
If you plan to take late retirement, the new factors will result in a higher level of compensation each year than would be calculated using the current factors.
If you plan to take a lump sum alongside late retirement, the situation is more complicated, because the new factors are less generous for lump sums, and more generous for late retirement.
What to do next
You’ll need to consider your individual circumstances to decide whether you should retire before or after the new factors come into effect.
To help you understand your options, if you’re 55 or over, you can use our online service ‘Quote and Retire’ on our member website. This will show you your potential levels of compensation under the new and existing factors. From 1 July 2023, this service will help you explore how your cash lump sum and ongoing payments may change if you decide to retire before or after 1 October 2023, as you can see a quote for a retirement date up to three months in advance.
Alongside our online ‘Quote and Retire’ service, you can also call our member services team or send us a secure message to request retirement quotes for dates before and after the change in factors.
When you compare your options, please bear in mind that the difference in the value of the lump sum is a one-off effect, whereas the difference in ongoing payments will remain for the rest of your life. It’s also important to note that the lump sum is tax-free, whereas your ongoing payments may be subject to tax.
Please also be aware that our separate online tool, the ‘Benefit Modeller’, will continue to use the current factors until 1 October 2023 and should not be used to compare how your benefits could change from this date.
Anyone who retires before 1 October 2023 will do so based on the current factors.
Amendments to factors are usually made each year (and, if needed, at other times too) to account for changes in financial markets and life expectancy during the previous year.
Members who have fully retired, and members of the Financial Assistance Scheme (FAS) won’t be affected.
To find out more, please log into the member site for more information about how the new factors affect you.
View the new factors.