Important changes for those retiring soon

New factors come into effect on 1 March 2023

Each year we update our actuarial factors to make sure they’re actuarially equivalent, i.e., so that the cost to us of providing each member's compensation is the same regardless of the choices they make around their retirement. We take into account external influences, such as movements in financial markets and changes to life expectancy.

Because of rising interest rates, we’ve had to update them again sooner than usual. These changes that will affect members who choose to retire on or after 1 March 2023.

How will the changes affect PPF compensation?

Starting your payments at your normal pension age with a tax-free lump sum will result in a smaller lump sum for the same amount of annual compensation given up.

Taking early retirement (i.e., starting your PPF payments before your normal pension age) will result in a lower level of compensation each year than using the current factors.

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

With late retirement i.e., starting your PPF payments after your normal pension age) the new factors will result in a higher level of compensation each year than using the current factors.

If you plan to take a tax-free lump sum alongside late retirement, the situation is more complicated, because the new factors are less generous for lump sums, and more generous for late retirement.

What should I do?

If you’re planning to retire soon, you will need to consider your individual circumstances to decide whether you should retire before or after the new factors come into effect.

To help you understand your options, if you’re 55 or over, you can use our online Quote and Retire tool to see your potential levels of compensation under the new and existing factors. This tool will help you explore how your cash lump sum and ongoing payments may change if you decide to retire before or after 1st March 2023, as you can see a quote for a retirement date up to three months in advance.

Alongside our online service, you can also call or write to us to request retirement quotes for dates before and after the change in factors.

When you compare your options, please bear in mind that the difference in the value of the 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.

Please be aware that our Benefit Modeller tool will continue to use the current factors until 1 March 2023 and should not be used to compare how your benefits could change based on the date you’re thinking of retiring.

If you’re retiring before 1 March 2023, the final calculation will be done using the factors that are currently in effect. 

Members who have already started taking their PPF payments and members of the Financial Assistance Scheme (FAS) won’t be affected. 

Find out more

If you’re a member, please log into the member site to use our online tools and to look at some examples to demonstrate what might happen in normal, early and late retirement scenarios.

If you’re a pensions professional, you can download our latest actuarial factors here.