Following extensive lobbying by us, the Home Office (HO) commissioned the Government Actuary’s Department (GAD) to produce a pension calculator for use by police officers, in order to provide them with an illustration of the retirement benefits they might expect to receive from the police pension schemes, when they choose to retire. The Pensions Calculator went live on 9 March 2018.
Following feedback from members and reps that the new calculator was proving quite challenging to use, we have produced some guidance to help those wishing to use it.
Guidance notes to assist you when using the pensions calculator:
The new calculator deals with the benefits officers may receive from all three of the current police pension schemes, these being the:
These schemes are all defined benefits schemes, but the benefits from the first two are based on the member’s final salary, whereas the CARE 2015 Scheme is a Career Average Revalued Earnings (CARE) scheme. Under the CARE 2015 Scheme, benefits accrue on a yearly basis based on the pay received by the member during that year.
The calculator deals with the transitional provisions introduced along with the CARE 2015 Scheme (covering those who move across into the CARE 2015 Scheme from the PPS 1987 or the NPPS 2006) and also with the effects of periods of part-time service.
Consequently, by its very nature, the calculator is complex and in order to obtain the appropriate results members need to accurately input a certain amount of information.
In order to assist members in doing this there are “More Info” boxes provided alongside many of the questions. Also, we recommend that members take the time to read the guidance notes provided prior to attempting to fill in the calculator as they are designed to assist in the process and to help members understand the results.
Members are also advised to have available the latest benefit statement that they have been issued with by their force’s scheme administrator, as they should be able to extract much of the information it is necessary to input into the calculator, from that document.
Predicting the likely benefits at retirement under the two final salary schemes (the PPS 1987 and the NPPS 2006) is relatively simple. However, due to the way in which career average revalued earnings schemes work, it is more difficult to predict likely benefits under the CARE 2015 Scheme.
There are some variables that officers themselves can choose to vary when using the calculator, for example:
• The date when they retire
• Whether they work part-time at any point
There are also some elements that are not under officers’ control, such as movements in the Consumer Price Index (CPI). GAD have had to make assumptions about these, in order to predict the value of future benefits. Furthermore, whilst the assumptions are based on the best information available to GAD actuaries, they are predictions, and therefore they cannot be perfect. Therefore, there may be a variation between what the calculator predicts and what is actually provided under the CARE 2015 Scheme. However, every effort has been taken to design a calculator which gives good indicative results and HO/GAD have undertaken to make adjustments to the calculator in the future, to keep it as up-to-date and realistic as possible.
Some specific points which should be reiterated are as follows:
• The calculator allows a member to select the date (and therefore the age) at which they feel that they might like to retire and the calculator produces indicative results based on that date. If members wish to compare those results with the indicative benefits they might expect to receive at an alternative date/age then they need to complete the details in the calculator again using that alternative date as the retirement date. There is no limit to the number of alternatives that can be generated for comparison purposes.
• The calculator assumes that CPI movement will be +2% on an ongoing basis. Three sets of results are shown on the basis that salary increases and inflation will be CPI, CPI+1% and CPI+2% respectively. However, no allowance is made for any increases in salary due to promotion or incremental progression.
• Results are shown in two ways. One set of results reflects the actual projected figures, and the other reflects what those figures are worth in today’s terms, making allowances for future inflation.
The results produced by the calculator are indicative only and do not in any way constitute financial advice, which if required by a member, should be obtained from an independent financial adviser (IFA).
The calculator makes an assumption about the continuing rate of CPI movement and also uses the currently applicable early and late retirement factors in the CARE 2015 Scheme where appropriate, and the current commutation factors for the PPS 1987. These are all subject to periodic review and adjustment as and when required.
For an officer who is currently part-time the calculator assumes that the officer will continue to work part-time at the current proportion of hours worked until retirement - which may not prove to be the case.
Going forward our hope and aim is to ensure that this pensions’ calculator, produced by the HO/GAD, is as fit for purpose and user friendly as is possible.
With that aim in mind we are currently collating feedback on the usage of the calculator which we can pass back to the HO/GAD and which may allow them to make adjustments to it. Please send any feedback that you have to your Branch Board Secretary who can collect the information and send it on to us. (JBB Circular 13/2018 contains further information for Secretaries). We can then collate the comments centrally and pass them on to the HO/GAD. The contact details of your Branch Board Secretary can be found on the Contact Us page.