Purchase of added years - Regulation 55
1. Under Regulation 55 of the Local Government Pension Scheme Regulations 1997 (SI No. 1612 of 1997), an active member may elect to make additional contributions to the Scheme to increase his total membership by an additional period. This additional period is generally referred to as "added years", though it does not have to be a whole number. Regulation 55(6) provides that the amounts of the additional contributions must be such percentage of the member’s pay for the time being as is shown in guidance issued by the Government Actuary. The purpose of this note prepared by the Government Actuary's Department for the Department of the Environment, Transport and the Regions, and issued to them for onward transmission to administering authorities and employing authorities, is to provide the guidance required by Regulation 55(6).
Disclaimer
2. The provisions of Regulation 31 create the opportunity for most members to receive unreduced immediate retirement benefits before their Normal Retirement Dates ("NRDs"). The way the provisions have been drafted produces a situation in which it is difficult to derive reasonable contribution rates for added years which do not, overall, cause a loss to the funds maintained by administering authorities, so leading ultimately to higher contributions by employing authorities. This is because added years are (we are advised) included in the period of total membership which is used to determine whether retirement benefits commencing before NRD under Regulation 31 have to be reduced under Regulation 31(4). Thus, it would appear that, by the purchase of added years, a member is able to bring forward the date on which he can retire early with unreduced benefits under Regulation 31, so increasing the value of the benefits he receives for his actual service and for any other period which is included in the definition of total membership. It is not possible to make an allowance for the increase in the value of benefits for other service in contributions for added years to be derived from a simple table of rates based only on the member’s NRD, sex and age at which contributions commence. As the determination of contributions on a case by case basis is hardly practicable, no allowance has been made for the effect on the value of other benefits in the contribution rates for added years which are the subject of this Guidance Note.
Additional actuarial
assumptions
3. A range of assumptions has to be made in deriving additional contributions for added years, both for elections to purchase added years which are made before, and after, 1 April 1998. Whereas, though, in determining contribution rates for added years where the election to purchase added years was made under the previous regulations, the age at which a member could retire with unreduced immediate benefits was known for certain to be his NRD, this is not now the case. Under Regulation 31, a member can in almost all cases receive unreduced benefits before his NRD. Thus an assumption has to be made as to the average numbers of years early, i.e. before his NRD, that a member will retire with unreduced immediate benefits. This period is likely to be greater for new entrants after 31 March 1998 than for those entering before, because all new entrants after this date have a NRD of 65 whereas only existing members who could not complete 25 years’ service by age 65 have a NRD as late as age 65. Necessarily, therefore, contribution rates for added years which are calculated on the assumption that members will retire with unreduced benefits at an average age earlier than NRD will be less attractive to those who do not take their benefits until NRD than to those who retire earlier.
The
Tables
4. Four sets of tables, as summarised below, are attached to this Guidance Note, in order to determine the additional contributions, expressed as a percentage of the member’s pay, for an increase in total membership of one year.
|
Table A - |
Males under age 45 on their first day of membership of the Scheme, with different rates for entrants before 1 April 1998, depending on their NRD, than for more recent entrants. |
|
Table B - |
As for Table A, but for Females |
|
Table C - |
Males aged at least 45 on their first day of membership of the Scheme, who have a higher rate of personal pension than younger entrants but no separate lump sum, but otherwise as for Table A. |
|
Table D - |
As for Table C, but for Females. |
In order that the whole year may be counted as part of total membership, other than on death in service or on retirement on grounds of permanent incapacity, the member must continue paying additional contributions until his last birthday before NRD (or until his NRD if that is a birthday).
5. Care should be taken to use the figures from the correct column of the tables for members with a NRD of 65 according to whether or not they were members immediately before 1 April 1998. The lower rates in the penultimate column apply only to those who were members immediately before 1 April 1998. They are lower than the rates in the final column applicable to entrants since March 1998 because of the assumption that, on average, post-March 1998 entrants will retire with an unreduced immediate pension at an earlier age than those with a NRD of 65 who were members immediately before 1 March 1998.
6. Members intending to retire before their NRD but at an age when they would be entitled to immediate retirement benefits without reduction under Regulation 31(4) need to be aware that the additional period for which they have elected to make additional contributions would be reduced in accordance with Regulations 55(10) and 83(8), to reflect the contributions not to be paid for the remaining period to the NRD. Thus a post March 1998 entrant with 5 years’ transferred in service who commenced additional contributions at age 40 and intended to retire at 60 having purchased 4 added years would need to elect to purchase 5 added years in order to receive 4 added years on retirement at 60 under Regulation 31. This is because the 5 added years would be scaled down in the proportion of years’ contributions paid to years’ contributions due by NRD of 65, i.e.:
5 added years applied for x 20 = 4 years purchased
25
Review of
factors
7. The factors will be reviewed from time to time. They would in any event be reviewed if the Regulations were amended to provide that, in the event of retirement under Regulation 31, the added years would be reduced for early payment by reference to the whole period between the date of retirement and the NRD as well as being reduced for contributions not paid, under Regulation 83(8).
Table A
Added years - Males -
(1/80th) Accrual
Additional contributions, of the percentage of pay, to be made by an active member who has elected to make additional contributions to the Scheme to increase his total membership
Members to whom Regulation
54(1) does not apply
|
Age on next birthday after election |
Percentage for an increase in total membership of 1 year to be used by reference to the normal retirement date below of a member who was a member immediately before 1 April 1998 |
Percentage for an increase in total membership of 1 year to be used for a member | ||||||
|
|
60 |
Over 60 and under 61 |
61 and under 62 |
62 and under 63 |
63 and under 64 |
64 and under 65 |
65 |
with a NRD of 65 who was not a member immediately before 1 April 1998 |
|
26 |
0.54 |
|
|
|
|
|
|
0.46 |
|
27 |
0.56 |
|
|
|
|
|
|
0.48 |
|
28 |
0.59 |
|
|
|
|
|
|
0.50 |
|
29 |
0.61 |
|
|
|
|
|
|
0.52 |
|
30 |
0.64 |
|
|
|
|
|
|
0.54 |
|
31 |
0.67 |
|
|
|
|
|
|
0.56 |
|
32 |
0.70 |
|
|
|
|
|
|
0.58 |
|
33 |
0.73 |
|
|
|
|
|
|
0.60 |
|
34 |
0.76 |
|
|
|
|
|
|
0.63 |
|
35 |
0.80 |
|
|
|
|
|
|
0.66 |
|
36 |
0.84 |
0.83 |
|
|
|
|
|
0.69 |
|
37 |
0.89 |
0.88 |
0.82 |
|
|
|
|
0.72 |
|
38 |
0.94 |
0.93 |
0.87 |
0.82 |
|
|
|
0.76 |
|
39 |
0.99 |
0.98 |
0.92 |
0.87 |
0.81 |
|
|
0.79 |
|
40 |
1.05 |
1.04 |
0.97 |
0.91 |
0.86 |
0.80 |
|
0.83 |
|
41 |
1.12 |
1.10 |
1.03 |
0.97 |
0.90 |
0.85 |
0.81 |
0.88 |
|
42 |
1.19 |
1.18 |
1.09 |
1.02 |
0.96 |
0.89 |
0.85 |
0.93 |
|
43 |
1.27 |
1.26 |
1.17 |
1.09 |
1.01 |
0.95 |
0.90 |
0.98 |
|
44 |
1.37 |
1.35 |
1.25 |
1.16 |
1.08 |
1.00 |
0.96 |
1.04 |
|
45 |
1.47 |
1.45 |
1.34 |
1.24 |
1.15 |
1.07 |
1.01 |
1.10 |
|
46 |
1.59 |
1.57 |
1.44 |
1.33 |
1.23 |
1.14 |
1.08 |
1.17 |
|
47 |
1.73 |
1.70 |
1.56 |
1.43 |
1.31 |
1.22 |
1.15 |
1.25 |
|
48 |
1.89 |
1.86 |
1.69 |
1.55 |
1.41 |
1.30 |
1.23 |
1.34 |
|
49 |
2.08 |
2.05 |
1.84 |
1.68 |
1.53 |
1.40 |
1.32 |
1.44 |
|
50 |
2.30 |
2.27 |
2.03 |
1.83 |
1.66 |
1.52 |
1.42 |
1.55 |
|
51 |
2.58 |
2.54 |
2.25 |
2.01 |
1.81 |
1.65 |
1.53 |
1.68 |
|
52 |
2.92 |
2.88 |
2.51 |
2.23 |
1.99 |
1.79 |
1.66 |
1.82 |
|
53 |
3.35 |
3.31 |
2.85 |
2.49 |
2.20 |
1.97 |
1.81 |
1.99 |
|
54 |
3.93 |
3.88 |
3.27 |
2.82 |
2.46 |
2.18 |
1.99 |
2.19 |
|
55 |
4.74 |
4.68 |
3.83 |
3.24 |
2.78 |
2.43 |
2.20 |
2.42 |
|
56 |
5.87 |
5.78 |
4.62 |
3.79 |
3.20 |
2.75 |
2.45 |
2.66 |
|
57 |
7.74 |
7.61 |
5.70 |
4.56 |
3.74 |
3.16 |
2.77 |
2.95 |
|
58 |
11.46 |
11.26 |
7.49 |
5.62 |
4.50 |
3.69 |
3.17 |
3.31 |
|
59 |
22.63 |
22.18 |
11.06 |
7.37 |
5.53 |
4.44 |
3.71 |
3.80 |
|
60 |
|
|
21.76 |
10.87 |
7.25 |
5.45 |
4.46 |
4.47 |
|
61 |
|
|
|
21.35 |
10.67 |
7.13 |
5.47 |
5.48 |
|
62 |
|
|
|
|
20.93 |
10.47 |
7.15 |
7.16 |
|
63 |
|
|
|
|
|
20.51 |
10.51 |
10.52 |
|
64 |
|
|
|
|
|
|
20.58 |
20.60 |
Table B
Added Years - Females -
(1/80th Accrual)
Additional contributions, of the percentage of pay, to be made by an active member who has elected to make additional contributions to the Scheme to increase his total membership
Members to whom Regulation
54(1) does not apply
|
Age on next birthday after election |
Percentage for an increase in total membership of 1 year to be used by reference to the normal retirement date below of a member who was a member immediately before 1 April 1998 |
Percentage for an increase in total membership of 1 year to be used for a member | ||||||
|
|
60 |
Over 60 and under 61 |
61 and under 62 |
62 and under 63 |
63 and under 64 |
64 and under 65 |
65 |
with a NRD of 65 who was not a member immediately before 1 April 1998 |
|
26 |
0.56 |
|
|
|
|
|
|
0.48 |
|
27 |
0.58 |
|
|
|
|
|
|
0.50 |
|
28 |
0.61 |
|
|
|
|
|
|
0.52 |
|
29 |
0.63 |
|
|
|
|
|
|
0.54 |
|
30 |
0.66 |
|
|
|
|
|
|
0.56 |
|
31 |
0.69 |
|
|
|
|
|
|
0.58 |
|
32 |
0.72 |
|
|
|
|
|
|
0.61 |
|
33 |
0.76 |
|
|
|
|
|
|
0.63 |
|
34 |
0.79 |
|
|
|
|
|
|
0.66 |
|
35 |
0.83 |
|
|
|
|
|
|
0.69 |
|
36 |
0.87 |
0.86 |
|
|
|
|
|
0.72 |
|
37 |
0.92 |
0.91 |
0.86 |
|
|
|
|
0.75 |
|
38 |
0.97 |
0.96 |
0.91 |
0.85 |
|
|
|
0.79 |
|
39 |
1.03 |
1.01 |
0.96 |
0.90 |
0.85 |
|
|
0.83 |
|
40 |
1.09 |
1.07 |
1.01 |
0.95 |
0.90 |
0.84 |
|
0.87 |
|
41 |
1.16 |
1.14 |
1.07 |
1.00 |
0.95 |
0.89 |
0.85 |
0.92 |
|
42 |
1.23 |
1.22 |
1.14 |
1.06 |
1.00 |
0.94 |
0.90 |
0.97 |
|
43 |
1.31 |
1.30 |
1.21 |
1.13 |
1.06 |
0.99 |
0.95 |
1.02 |
|
44 |
1.41 |
1.39 |
1.29 |
1.21 |
1.13 |
1.05 |
1.00 |
1.08 |
|
45 |
1.52 |
1.50 |
1.38 |
1.29 |
1.20 |
1.12 |
1.06 |
1.15 |
|
46 |
1.64 |
1.62 |
1.49 |
1.38 |
1.28 |
1.19 |
1.13 |
1.22 |
|
47 |
1.78 |
1.76 |
1.61 |
1.49 |
1.37 |
1.27 |
1.20 |
1.30 |
|
48 |
1.94 |
1.92 |
1.75 |
1.61 |
1.48 |
1.36 |
1.29 |
1.39 |
|
49 |
2.14 |
2.11 |
1.91 |
1.74 |
1.60 |
1.47 |
1.38 |
1.50 |
|
50 |
2.37 |
2.34 |
2.10 |
1.90 |
1.73 |
1.59 |
1.49 |
1.62 |
|
51 |
2.65 |
2.62 |
2.32 |
2.09 |
1.89 |
1.72 |
1.60 |
1.75 |
|
52 |
3.00 |
2.96 |
2.60 |
2.31 |
2.07 |
1.88 |
1.74 |
1.90 |
|
53 |
3.45 |
3.40 |
2.94 |
2.58 |
2.29 |
2.06 |
1.90 |
2.07 |
|
54 |
4.04 |
3.99 |
3.37 |
2.92 |
2.56 |
2.27 |
2.08 |
2.28 |
|
55 |
4.87 |
4.81 |
3.95 |
3.34 |
2.89 |
2.54 |
2.30 |
2.52 |
|
56 |
6.02 |
5.93 |
4.76 |
3.92 |
3.31 |
2.87 |
2.56 |
2.77 |
|
57 |
7.92 |
7.80 |
5.86 |
4.71 |
3.88 |
3.28 |
2.89 |
3.06 |
|
58 |
11.71 |
11.51 |
7.69 |
5.79 |
4.66 |
3.84 |
3.31 |
3.44 |
|
59 |
23.07 |
22.64 |
11.32 |
7.57 |
5.71 |
4.61 |
3.86 |
3.94 |
|
60 |
|
|
22.22 |
11.13 |
7.46 |
5.64 |
4.63 |
4.63 |
|
61 |
|
|
|
21.81 |
10.94 |
7.34 |
5.66 |
5.66 |
|
62 |
|
|
|
|
21.39 |
10.75 |
7.36 |
7.36 |
|
63 |
|
|
|
|
|
20.97 |
10.77 |
10.77 |
|
64 |
|
|
|
|
|
|
21.00 |
21.00 |
Table C
Added Years - Males -
(1/60th) Accrual
Additional contributions, of the percentage of pay, to be made by an active member who has elected to make additional contributions to the Scheme to increase his total membership
Members to whom Regulation
54(1) applies
|
Age on next birthday after election |
Percentage for an increase in total membership of 1 year to be used by reference to the normal retirement date below of a member who was a member immediately before 1 April 1998 |
Percentage for an increase in total membership of 1 year to be used for a member | ||||||
|
|
60 |
Over 60 and under 61 |
61 and under 62 |
62 and under 63 |
63 and under 64 |
64 and under 65 |
65 |
with a NRD of 65 who was not a member immediately before 1 April 1998 |
|
46 |
1.74 |
1.71 |
1.56 |
1.43 |
1.32 |
1.22 |
1.15 |
1.27 |
|
47 |
1.89 |
1.86 |
1.69 |
1.54 |
1.41 |
1.30 |
1.23 |
1.36 |
|
48 |
2.06 |
2.03 |
1.84 |
1.67 |
1.52 |
1.39 |
1.31 |
1.45 |
|
49 |
2.27 |
2.23 |
2.00 |
1.81 |
1.64 |
1.50 |
1.40 |
1.56 |
|
50 |
2.51 |
2.47 |
2.20 |
1.98 |
1.79 |
1.62 |
1.51 |
1.68 |
|
51 |
2.81 |
2.77 |
2.44 |
2.17 |
1.95 |
1.76 |
1.63 |
1.81 |
|
52 |
3.19 |
3.14 |
2.73 |
2.40 |
2.14 |
1.92 |
1.77 |
1.97 |
|
53 |
3.67 |
3.61 |
3.09 |
2.69 |
2.37 |
2.11 |
1.93 |
2.15 |
|
54 |
4.30 |
4.23 |
3.55 |
3.04 |
2.64 |
2.33 |
2.12 |
2.37 |
|
55 |
5.19 |
5.11 |
4.16 |
3.50 |
2.99 |
2.60 |
2.34 |
2.62 |
|
56 |
6.41 |
6.30 |
5.02 |
4.09 |
3.44 |
2.94 |
2.61 |
2.87 |
|
57 |
8.44 |
8.28 |
6.18 |
4.93 |
4.02 |
3.38 |
2.95 |
3.17 |
|
58 |
12.49 |
12.24 |
8.11 |
6.06 |
4.84 |
3.95 |
3.38 |
3.56 |
|
59 |
24.63 |
24.08 |
11.97 |
7.94 |
5.94 |
4.75 |
3.96 |
4.07 |
|
60 |
|
|
23.51 |
11.70 |
7.77 |
5.82 |
4.76 |
4.79 |
|
61 |
|
|
|
22.95 |
11.42 |
7.60 |
5.82 |
5.85 |
|
62 |
|
|
|
|
22.38 |
11.15 |
7.60 |
7.63 |
|
63 |
|
|
|
|
|
21.81 |
11.16 |
11.19 |
|
64 |
|
|
|
|
|
|
21.83 |
21.86 |
Table D
Added Years - Females -
(1/60th) Accrual
Additional contributions, of the percentage of pay, to be made by an active member who has elected to make additional contributions to the Scheme to increase his total membership
Members to whom Regulation
54(1) applies
|
Age on next birthday after election |
Percentage for an increase in total membership of 1 year to be used by reference to the normal retirement date below of a member who was a member immediately before 1 April 1998 |
Percentage for an increase in total membership of 1 year to be used for a member | ||||||
|
|
60 |
Over 60 and under 61 |
61 and under 62 |
62 and under 63 |
63 and under 64 |
64 and under 65 |
65 |
with a NRD of 65 who was not a member immediately before 1 April 1998 |
|
46 |
1.83 |
1.80 |
1.66 |
1.52 |
1.41 |
1.30 |
1.23 |
1.35 |
|
47 |
1.98 |
1.95 |
1.79 |
1.64 |
1.51 |
1.39 |
1.32 |
1.44 |
|
48 |
2.17 |
2.14 |
1.93 |
1.77 |
1.63 |
1.49 |
1.41 |
1.54 |
|
49 |
2.39 |
2.35 |
2.12 |
1.92 |
1.76 |
1.61 |
1.51 |
1.66 |
|
50 |
2.65 |
2.61 |
2.33 |
2.10 |
1.90 |
1.74 |
1.62 |
1.79 |
|
51 |
2.96 |
2.91 |
2.58 |
2.30 |
2.07 |
1.88 |
1.75 |
1.93 |
|
52 |
3.35 |
3.30 |
2.88 |
2.55 |
2.28 |
2.05 |
1.90 |
2.10 |
|
53 |
3.85 |
3.79 |
3.26 |
2.85 |
2.52 |
2.25 |
2.07 |
2.29 |
|
54 |
4.51 |
4.44 |
3.74 |
3.22 |
2.81 |
2.49 |
2.27 |
2.52 |
|
55 |
5.43 |
5.36 |
4.38 |
3.69 |
3.18 |
2.78 |
2.51 |
2.79 |
|
56 |
6.71 |
6.60 |
5.28 |
4.32 |
3.64 |
3.14 |
2.80 |
3.05 |
|
57 |
8.82 |
8.66 |
6.49 |
5.21 |
4.26 |
3.59 |
3.16 |
3.37 |
|
58 |
13.03 |
12.78 |
8.50 |
6.38 |
5.13 |
4.20 |
3.62 |
3.78 |
|
59 |
25.64 |
25.11 |
12.52 |
8.34 |
6.27 |
5.05 |
4.22 |
4.32 |
|
60 |
|
|
24.55 |
12.25 |
8.18 |
6.16 |
5.06 |
5.07 |
|
61 |
|
|
|
23.98 |
11.99 |
8.02 |
6.17 |
6.18 |
|
62 |
|
|
|
|
23.42 |
11.72 |
8.02 |
8.03 |
|
63 |
|
|
|
|
|
22.84 |
11.73 |
11.74 |
|
64 |
|
|
|
|
|
|
22.84 |
22.85 |