Important changes for FAS members retiring soon

Read how changes to some factors for FAS members coming in December 2024 may affect your retirement.

Retirement factors are used to work out how much a pension scheme needs to pay members depending on how they decide to receive payments from the scheme – for example, whether they take a tax-free cash lump sum, if eligible to do so.

The responsibility for setting and reviewing the FAS factors lies with the Department for Work and Pensions (DWP).

DWP, supported by their actuarial advisor, the Government Actuary’s Department, have reviewed the factors in light of external developments (such as movements in financial markets) and have concluded it is appropriate to update existing factors. It is normal industry practice for factors to be reviewed periodically to ensure they remain up-to-date.

These factors will be introduced from 1 December 2024.

If you’re already retired, and in receipt of your annual assistance, then you are not impacted by this change.

If you’re yet to retire, you will only be impacted if you are eligible to exchange part of your annual assistance for a tax-free cash lump when you retire or are eligible for ill health early retirement. In this case, the new factors will have a different impact on what you receive:

Normal Retirement

If you’re eligible, and choose to take a tax-free cash lump sum, your payments at your normal retirement age will result in a smaller lump sum for the same amount of annual assistance given up, compared to the current factors.

Ill Health Early Retirement

Taking ill health early retirement before your normal retirement age will result in a lower level of assistance each year than using the current factors.

If you plan to take a tax-free cash lump sum alongside ill health early retirement, the new factors will result in a smaller lump sum and a lower level of assistance each year.

What to do next if you are taking ill health early retirement

You’ll need to consider your individual circumstances to decide whether you should retire before or after the new factors come into effect.

You might want to get financial advice to help you decide what to do next - however, this isn’t a service we can provide. MoneyHelper have a guide on choosing a financial adviser to get you started. Before speaking to an adviser, it's important to check they are authorised and regulated to help you. The Financial Conduct Authority (FCA) have a register of authorised financial advisers.

When you consider your options, please bear in mind that the difference in the value of the cash lump sum is a one-off effect, whereas the difference in ongoing payments will remain for the rest of your life. It’s also important to note that the lump sum is tax-free, whereas your ongoing payments may be subject to tax.

Anyone who retires before 1 December 2024 will do so based on the current factors.

Amendments to factors are usually made to account for changes in financial markets and life expectancy.

If you wish to see them, you can view the new factors on the member site.