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Retirement Cash

Retirement Cash Benefit Basis

A lump sum cash benefit can be paid at retirement either through commutation (ie exchange of pension for cash) or in addition to the pension benefits. Select from the drop-down list the basis of calculating any cash benefit provided. The options are:

  • Neutral or Nil
  • 25% of Pension
  • IR Maximum
  • 2.25 × Pension
  • Accrual × Salary for each year
  • 3 × Pension
  • Multiple of Pension
  • % of Pension

When using the IR Maximum option the user will need to set up the IR Maximum Parameters Rules.

When using the Accrual × Salary for each year, the user will be required to enter the salary, service and accrual rate on which this is based. Note that if using this option, ERF factors will not be applied to the cash on top lump sum. (If you do want ERFs to be applied to cash on top, you could use the Multiple of pension option instead.)

When using the Multiple of Pension, the Multiple can either be fixed for all members or be a member specific amount. To use a fixed Multiple, enter the value. To use a Member Specific Multiple, select from the drop-down list the data item containing the appropriate data.

When using the % of Pension, the Percentage can either be fixed for all members or be a member specific amount. To use a fixed Percentage, enter the value. To use a Member Specific Percentage, select from the drop-down list the data item containing the appropriate data.

When using 25% of Pension or % of Pension, the amount of cash lump sum will be determined by the Commutation Tables specified.

For all of these options you can select whether to Ignore GMP in Split. The Commutation will be restricted to avoid commuting the GMP, however there is no allowance for post-retirement increases in calculating this restriction. In addition, you will be required to specify the Commutation Priority and the Commutation Tables to use.

Finally, where benefits for both Cash On Top of pension and Cash Commutation are specified the Cash Commutation is calculated first. If the Cash On Top formula relates to the amount of pension this will be based on the pension prior to commutation.

Retirement Cash: Accrual Rate

This field is only required if the Cash Calculations are based on Accrual × Salary for each year. Enter the percentage of salary to be used in the calculation of cash for each year of service i.e. for 3/80ths use 0.0375.

When using this option, Early-Retirement Factors will not be applied to the cash-on-top benefit.

Cash Service

This field is only required if the Cash Calculations are based on Accrual × Salary for each year. Select from the drop-down list the service to be used in the calculation of cash for each year of service. The options are:

  • Scheme Membership
  • Company Service

Note that total service from either Date Joined Scheme or Date Joined Company will be used in these calculations.

When using this option, Early-Retirement Factors will not be applied to the cash-on-top benefit.

Commutation Multiple

This field is only required if the Cash Calculations are based on a Multiple of Pension. The Multiple can either be fixed for all members or member specific.

To use a fixed multiple, enter the multiple here. (Using a multiple of 3 is the same as selecting 3 × pension.)

To value a member specific multiple, select from the drop-down list the data item containing the appropriate data.

Percentage of Pension for Cash

This field is only required if the Cash Calculations are based on a % of Pension. The Percentage can either be fixed for all members or a member specific percentage.

To value a fixed percentage for all members, enter the percentage here ie for 25% enter 0.25.

To value a member-specific percentage, select from the drop-down list the data item containing the appropriate data.

Separate A-Day Cash Factors for each Pension Increase

This field indicates if separate A Day cash factors are to be calculated for each pension increase or whether a single factor applies to the entire pension.

If a User opts for the average factor approach which means the field is left unchecked, then the User needs to select whether the average factor will be applied Pro Rata or Priority.

Treat Independent Slice/PUP Cash as Cash on Top

Users sometimes value Cash on Top in the Ind Slices and Ind PUPs giving data items the same payment start and end age. If the intention is to include this Cash on Top amount in the A Day max calculation, then this box should be checked.

If this box is unchecked the system will still value cash amounts in the Ind Slices and Ind PUPs but the A Day maximum will not be reduced to allow for this Cash on Top (if the basis has Percentage of A Day Cash commutation specified).

Save As

Click the Save As button to save with a new parameter description.

Save

Clicking on the Save button allows you to save the entries.

Quit

Clicking on the Quit button allows you to exit without saving any of your changes.

In some of the screens you will be asked to confirm if you want to exit Ignoring all changes. If you click Yes, the file will be closed without saving any changes. If you click No you will be returned to your original screen.