Change to Defined Benefit Factors
This announcement affects some members of the C, N, DSL and I Plans.
The factors used in pension calculations are regularly reviewed by the Trustee’s advisers.They make certain assumptions about the future, particularly in relation to longevity and investment returns to assess how long a pension may be payable and the cost of providing it.
Following a recent review, some factors will be changed with effect from 1 October 2008.In particular, the factors that are used to convert ASC/AVC funds and Money Purchase Transfers-in to pension will be increased, which will mean those funds will buy less pension.
Since the introduction of new legislation in April 2006, it has been possible for members of a defined benefit plan (C, N, I and DSL Plans) to use their ASC/AVC fund to provide up to the maximum 25% tax-free lump sum at retirement. If you plan to use any ASC/AVC fund to provide the tax-free lump sum at retirement, the changes to the factors will only affect any fund that is not used to provide the lump sum.
A comparison of the current and new factors for April 2008 are included in downloadable PDFs. The factors quoted are all for Limited Price Indexation (LPI) increases up to 5% once the pension has commenced.
Current employees can find details of the options for increases on ASC/AVC pension on this website under pensions plans / retirement / asc/avc options - you will have to sign in on the top right hand corner using your IBM intranet details first.
Although the changes are effective from October, the April factors are shown to enable current employees to compare the estimated benefits that were detailed in their 2008 Pension Benefit Statements that were issued in June.
If you have any queries, please contact your Pensions Officer.
David Newman
Pensions Trust Manager
Archived 12/12/08
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Last Updated: 15/06/2009
