PSI9.2.5 - Service after Normal Retirement Date: Benefits Deferred to Actual Retirement (Discretionary Practice Pre FA 89) - Methods of giving extra benefits - Actuarial or Cost of Living Increases - Pension

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

[PN7.45(c)]

The third way in which extra benefits can be given is by actuarial or cost of living increases for the period of deferment. These are in place of and not additional to the increases in PSI9.2.2 (a) or (b). Scheme rules can provide for the maximum benefits payable at NRD to be increased by the greater of:

1. an actuarial increase, ie an increase based on the period of deferment (see PSI9.2.7a) and the yield for the same period on the scheme's investments or the policy monies, or
2. an increase equal to the increase in the cost of living during the period of deferment, measured by reference to the Retail Price Index (see PSI7.1.12).

Where a pension debit is taken into account (see PSI9.2.2), the pension benefits calculated in accordance with either a. or b. above must be reduced by the pension debit. The pension debit is calculated on the basis of the appropriate example in PSI9.1.14.