Example 1 An employee with pre-17 March 1987 continued rights retires at NRD after 20 years’ service. Final remuneration is £12,000. Employee has a retained lump sum benefit of £8,000. The maximum lump sum payable is:
120/80 x £12,000 = £18,000
but the scheme benefit must be restricted by the full retained
benefit of £8,000. The lump sum payable under the scheme is
therefore restricted to
£10,000.
Example 2 Salary details as in example 1 but
service to NRD is 15 years, and the retained benefit is
£5,000:
72/80 (see PSI8.1.23) x £12,000 = £10,800
In this example the full £10,800 can be paid because the
aggregate scheme benefit plus £5,000 retained benefit is less
than £18,000 (1½ times final remuneration).
Example 3 Details as in example 1 except that the
retained benefit is £10,000:
120/ 80 x £12,000 = £18,000
If the scheme benefit is restricted so that it, plus the retained benefit, does not exceed 1½ times final remuneration the scheme lump sum payable is £8,000. We do not, however, restrict benefits below strict 3N/80ths which in this case is:
60/80 x £12,000 = £9,000
So the scheme may pay a lump sum of £9,000 even though when added to the retained benefit of £10,000 the aggregate benefit exceeds the 1½ times final remuneration limit.
