Calculation of fund credit – 1 March 2016

CALCULATION OF OPENING BALANCE FOR FUND CREDIT, FOR MEMBERS PRESENT AS AT 1 MARCH 2016 

MEMBERS PRESENT AS AT 29 FEBRUARY 2016, WHO HAD BEEN IN OFFICE FOR MORE THAN 5 YEARS ON THAT DATE, WERE CREDITED WITH THE FOLLOWING OPENING BALANCE AS AT 1 MARCH 2016:

• A. Basic Fund Credit before additions

  This was calculated as at 29 February 2016 – see What is the Fund Credit? elsewhere on this site. 

  PLUS

• B. Additional Service Benefit (or ASB)

  20% of the member's revalued annual pensionable salary for each year of service up until 29 February 2016, but only counting up to a maximum of 10 years of service.

  PLUS

• C. Equalisation Amount after capping (EA)

  A notional or “deemed” employer contribution of 20% of the member's monthly pensionable salary as earned over the member's whole period of service up to 29 February 2016, plus the net investment returns earned by the Fund on the investment of these 20% contributions, but subject to the “cap” on this amount as explained in the section of this site dealing with the Old Rules that applied before 1 March 2016. 

  MINUS

• D. Adjustment – capped members

  Members whose Equalisation Amount was “capped”, or was expected to be “capped” if they were to serve until the 2019 Election, had the opening balance of their Fund Credit on 1 March 2016 reduced by a specified amount, to ensure that their Fund Credit if they served up to the 2019 Election was not expected to be greater than their Fund benefits would have been if the Rules had not been changed with effect from 1 March 2016 (as they were). 

  This amount was calculated as follows:

  A projected ASB and Equalisation Amount (EA) as at the 2019 Election date (taken as 30 June 2019) was calculated, allowing for future salary growth and investment returns – but also allowing for further capping in 2019. This figure (projected 2019 ASB plus projected capped 2019 EA) was then worked back (discounted) to 29 Feb 2016. This amount was then compared to (B) + (C) above. If it was less than (B) + (C), the difference (shortfall) is the adjustment amount (D) - otherwise amount (D) was nil.

  On 1 March 2016 the member's FUND CREDIT was set equal to the sum of A+B+C-D.

  After 1 March 2016, all members receive everything included in the FUND CREDIT. As a reminder – this is the opening balance calculated as at 1 March 2016 (as explained above), plus further retirement-savings contributions for the period after 1 March 2016, plus the investment returns.

  There is no further accrual of the ADDITIONAL SERVICE BENEFIT or EQUALISATION AMOUNT after 29 February 2016.

  Members who exited the Fund at or before the 2019 Election received everything in the FUND CREDIT as their benefit. However, to ensure that that such a member would NOT BE WORSE OFF before taxation, because of the new benefit design, an additional calculation was done as follows:

  1. A calculation was done as to what the member's total benefit would have been, under the “old Rules” (i.e. benefit design applying before 1 March 2016 changes), as if these still applied at the actual date of exit. This means that the calculation will allow for a further “accrual” of the ASB and the EA after 29 February 2016. (X)

  2. This was compared to the member's actual FUND CREDIT under the “new Rules” as at the date of exit. (Y)

  If (X) was greater than (Y), the difference was paid by the member's Legislature as an extra gratuity amount (subject to tax).

MEMBERS PRESENT AS AT 29 FEBRUARY 2016, WHO HAD NOT BEEN IN OFFICE FOR MORE THAN 5 YEARS ON THAT DATE, WERE CREDITED WITH THE FOLLOWING AS AT 1 MARCH 2016:

• A. Basic Fund Credit before additions

  This was calculated as at 29 February 2016 – see What is the Fund Credit? elsewhere on this site. 

  PLUS

• B. Additional Service Benefit (or ASB)

  20% of the member's revalued annual pensionable salary for each year of service up until 29 February 2016.

  PLUS

• C. Terminal Gratuity (TG) - if applicable

  The sum of A + B was compared to: 

  45% x the member's annual pensionable salary as at 29 February 2016 for each completed year of service (plus a proportion thereof for fractions of a year) = (D)

  If D was greater than the sum of A + B then the difference is the Terminal Gratuity (C) - otherwise amount C was nil.

On 1 March 2016 the member's FUND CREDIT was set equal to the sum of A+B+C

After 1 March 2016, all members will receive everything included in the FUND CREDIT. As a reminder – this is the opening balance calculated as at 1 March 2016 (as explained above), plus further retirement-savings contributions for the period after 1 March 2016, plus the investment returns.

There is no further accrual of the ADDITIONAL SERVICE BENEFIT or TERMINAL GRATUITY after 29 February 2016. 

Members who exited the Fund at or before the 2019 Election received everything in their FUND CREDIT as a benefit. However, to ensure that such members would NOT BE WORSE OFF before taxation, because of the new benefit design, an additional calculation was done as follows:

1. A calculation was done as to what the member's total benefit would have been, under the “old Rules” (i.e. benefit design applying before 1 March 2016 changes), as if these still applied at the actual date of exit. This means that the calculation will allow for a further “accrual” of the ASB and the TG (if applicable) after 29 February 2016. (X)
2. This was compared to the member's actual FUND CREDIT under the “new Rules” as at the date of exit. (Y)

If (X) was greater than (Y), the difference was paid to the member by their Legislature as an extra gratuity amount (subject to tax).