A police pension is an attractive feature of working as a member of the force, but like any complex financial scheme the details can seem confusing.
Documents and websites discussing police pensions can include unfamiliar words and descriptions, and without a clear, straightforward guide, it may feel like a challenge to understand them. There have also been three separate pension schemes in the last 30 years, meaning that different officers will be given their pension under different terms depending on when they entered the force, and some may even be a member of two schemes.
The CARE scheme that altered the police pensions in 2015 (see below) entitles police to a portion of 1/55.3th of their earnings. This will be recalculated in line with the Consumer Prices Index (CPI) each year, plus 1.25%, and is then added up to make their total pension amount.
So what is a deferred pension? What about an accrual rate? Read on to find out.
- 1987 Scheme - The Police Pensions Regulations Scheme implemented in 1987.
- 2006 Scheme - The Police Pensions Regulations Scheme implemented in 2006.
- 2015 CARE Scheme - Career Average Revalued Earning (CARE) is a kind of defined benefit pension scheme. Instead of basing pensions on members’ pensionable earnings in their last year of service as was the case with the 1987 and 2006 Schemes, they are now based on earnings across their career.
- Accrual rate - The rate at which a pension builds during a police officer’s service. There is a different rate for the 1987, 2006, and 2015 schemes.
- Active member - A member on an unpaid leave or career break for fewer than 5 years, who remains in pensionable service.
- Actuary - The business professional who assesses and evaluates financial risks, based on statistics and records.
- Approved career break - A time period of up to 5 years agreed by the employer during which a member takes an unpaid leave, with the promise of returning to service at the same rank as when they left. This may soon change, meaning that the time limit would be eradicated and the officer could return at any rank.
- Commutation - The tax-free lump sum payment police officers have the option to take when they are first given their police pension, made up of 25% of their pension. This does not apply to the 2006 scheme.
- Deferred member - A person entitled to a deferred pension (see definition below).
- Deferred pension - A pension for someone who has paid into a police pension scheme but has left the police force before retirement age. This pension will be paid at a later date at the age dictated by the regulations.
- Defined benefit scheme - A pension scheme where the amount you are paid is based on the amount of time you’ve worked for your employer and the amount of pensionable salary
- Defined contribution scheme - An occupational pension scheme where your contributions combined with your employer’s contributions and investment growth dictate the value of how much you will ultimately receive.
- Final/average pensionable pay - Under the 1987 and 2006 Schemes, this is the pay upon which a member’s pension benefits are based - usually the pay in the final year of service. Under the 2015 Scheme, it is the accrual of all the years of banked pension from the point of entering the scheme.
- Gap in service - As it sounds, this defines a time period following a member’s first day of Eligible Service under the 2015 Scheme when they have either opted out from the 2015 Scheme or are not in Eligible Service.
- Guaranteed minimum pension - The minimum pension a member must receive from a salary-related pension scheme that has since been contracted out, as accrued between 1978 and 1997.
- Pensionable earnings - Earnings on which pension contributions are paid.
- Pensionable service - A time period of pensionable service under the 2015 Scheme long enough to qualify a member aged 55 or more for a pension upon retirement. This does not include any kind of unpaid leave, such as a career break.
- State pension age - This is the age when an individual can claim their state pension and is separate from the Police Pension Schemes where retirement is based on age and length of service. It is important to note that there are legislated increases to the state pension age that are due to be phased in. To learn when you are likely to reach state pension age under the current legislation, find out here.
- Tapered protection period - Some members will have a period of time, known as a tapered protection period, after 1 April 2015, when they will continue to be in the 1987 Scheme or the 2006 Scheme, before moving onto the 2015 Scheme.
- Transition member - Members whose rights include allowances under the 1987 Scheme or the 2006, who later became members of the 2015 Scheme.
Ready to retire?
We hope that these definitions clear up some of the mystery concerning the many terms used during discussions of police pensions.
For guidance on the 1987, 2006 and 2015 Police Pension Schemes, you can find more on the government website.
If you are approaching pension age or thinking about retirement and are interested in learning more, sign up to one of our Options Pre-Retirement seminars. These are designed for officers with five years or fewer left in the job and are packed with unmissable financial information to help prepare for your retirement.
If you have a query about your individual police pension you should contact your pension administrator. You can find their contact details on the government website.