Final Salary or Defined Benefit
Occupational scheme arranged by employers and funded by employee and employer contributions. Pension depends on length of service and salary level.
Calculation of Loss
Loss is calculated as loss of taxable annual pension and loss of tax free lump sum remembering the
set off for ill health pensions. Need to know annual salary, scheme fraction (from scheme booklet) and length of service.
Consideration needs to be given to recent changes or planned change to such pension schemes e.g. 2014/15 changes to public sector pension schemes
Annual Pension Loss
Potential pension (based on potential earnings and service)
Actual pension (based on actual earnings and service)
Apply to multiplier to normal retirement age
Lump Sum Loss
Discounted back from retirement age to trial date with Longden set off if claimant in receipt of ill health pension.
Ensure employee contributions are deducted from loss of earnings.
Money Purchase or Defined Contribution
Contributions to a scheme are built into a fund to buy a pension on retirement. Either an occupational scheme with employer
contributions or a private or individual pension, including auto-enrolment schemes.
Calculation of Loss
Obtain details of employee and employer contributions and tax status of the Claimant. Details may be found on payslips.
Loss is restricted to loss of tax relief on employee contributions and any loss of tax free employer contributions.
Apply to multiplier for period of loss of earnings
Pension Scheme Illustrations
Do not use the pension scheme illustration of projected pension to calculate the loss as these include future inflation and will therefore
overstate the claim.
Ensure employee contributions are not deducted from loss of earnings.
Basic state pension (based on Claimant’s NI records over their working life).
Additional state pension – known as SERPS from 1978 to 2002 and as the Second State Pension or S2P to date. In 2016 S2P will be abolished.
Earnings related and paid to employees only. Consider whether there is any loss of S2P.
Consider whether state pension would have been deferred to actual intended retirement if later than state retirement age.
For further information contact Sally