Retiring officers face reduced pension lump sums after Treasury change
Police officers retiring under the 1987 Police Pension Scheme are facing immediate reductions in retirement lump sums following changes to pension commutation factors introduced this week.
The changes follow a Treasury decision to increase the SCAPE discount rate used in public service pension calculations. In a Written Ministerial Statement issued on Monday, pensions minister Torsten Bell confirmed the new SCAPE rate would increase to CPI plus two per cent.
Updated commutation factors issued following the decision took effect immediately and affect how much cash officers receive if they choose to exchange part of their annual pension for a lump sum at retirement. Guidance circulated to police pension administrators states that members of the 1987 scheme retiring from 21 May onwards are likely to receive around five per cent less lump sum than under the previous factors.
Illustrative examples contained in the guidance suggest an officer retiring at age 50 who may previously have expected a lump sum of around £174,850 could now receive approximately £166,075.
The Police Federation of England and Wales (PFEW) said the speed of the change had left some officers facing unexpected financial consequences after receiving retirement quotations based on the previous commutation factors only weeks earlier.
PFEW national secretary John Partington said: “After decades of service, the ‘thanks’ retiring officers get is this: government quietly shaving cash off a hard-earned retirement overnight.
“It’s a blatant case of picking the pockets of police pensioners, and we will not let it stand.”
The Federation said it is seeking independent actuarial and legal advice on the scale and justification for the changes, including whether officers who recently received retirement quotations may have grounds to challenge the decision because of financial detriment.
Guidance issued to police pension administrators stresses that officers’ accrued pension entitlements are not being reduced, but says the revised factors affect the amount members receive if they voluntarily exchange part of their pension for a larger lump sum.
The guidance also states that updated factors must apply from the date they are issued by the Government Actuary’s Department, including for officers retiring on the same day.
Similar changes are expected to affect other legacy public service pension schemes, including firefighters’ pensions, following the Treasury announcement.