You become a deferred member if you have at least two years of qualifying service and:
- you leave the police force before normal minimum pension age (NMPA) or
- you leave the police force after reaching NMPA, but before reaching your State Pension age (SPA) and you do not take a pension or
- you opt out
If you rejoin the police force or opt back in within 5 years then you will become an active member again. Otherwise, you will remain a deferred member.
Unless you transfer your scheme benefits to another pension scheme or a deferred pension comes into payment early, you will receive a deferred pension at your SPA.
A deferred pension will be increased in line with the Consumer Price Index (CPI) under the Pensions (Increase) Act 1971 from the time that you leave the police force or opt out until the date at which your benefits become payable.
A member leaves the police force at age 50 with an accrued earned pension of £20,000 per year. When s/he leaves, his/her accrued earned pension will increase in line with CPI under the Pensions (Increase) Act 1971 and will be payable at his/her SPA).
Assume that by the time that s/he reaches SPA his/her deferred pension has increased under the Pensions (Increase) Act 1971 by 40%. The member will, therefore, be able to retire at SPA with a pension of around £28,000 (= £20,000 × 140%).
At retirement, the member has the option to commute pension for lump sum at a rate of £12 of lump sum for every £1 of pension given up. The commutation lump sum cannot be larger than 25% of the value of the member’s pension.
Early payment of deferred pension other than on ill-health grounds
If you have left the police force you can choose to have your deferred pension paid earlier than your SPA, but it will be reduced for early payment. This is called ‘actuarial reduction’ and is to compensate for the fact that the pension will be paid earlier and for a longer period.
Your pensions administrator can provide you with more information, but you should be aware that the reduction can be substantial and will be permanent.
If you were dismissed or required to resign, you can still claim your deferred pension early but you must give at least one month’s written notice to your Police Pension Authority of your intent to claim your pension.