Charges may apply if an employee is being retired early.
An explanation of ‘Capital Costs’
The extra costs to the Pension Fund of paying accrued benefits prematurely arise from the loss of employer and employee contributions until normal retirement age, the payment of accrued benefits – the lump sum and the pension – earlier than expected and the resultant loss of investment income. These effects, known collectively as the ‘actuarial strain on the fund’, can be calculated for each early retirement depending on salary, age and length of service and converted into a ‘capitalised sum’ using tables provided by the Fund’s actuary.
When will Capital Costs apply?
Extra charges will be made to the employer on a case by case basis where benefits are brought into payment:
- On grounds of redundancy, or
- Efficiency of the service, or
- With employer’s consent before normal retirement age, or
- Under flexible retirement arrangements before normal retirement age
How you will be informed on any Capital Costs applicable
Estimates of such charges will be supplied with the appropriate estimate request form – see section Request for Estimates.
Following retirement a letter will be sent to you confirming the charges and explaining your options for payment, which are as follows:
- Immediate payment
- Payment to be invoiced in April following retirement
- Payment spread over 3 years – an additional payment for interest will be charged
- Over a five year period with prior consent with the Pensions Manager only. An additional payment for interest will be charged.