Notes:
- In certain circumstances it may be desirable, where possible (see Note 2), or necessary to transfer the liability for providing GMPs to the State by payment of one of the following state scheme premiums:
* Contributions Equivalent Premium (CEP)
* Accrued Rights Premium (ARP)
* Pensioners Rights Premium (PRP)
* Transfer Premium (TP)
* Limited Revaluation Premium (LRP), where the scheme has undertaken to limit its responsibility for revaluing a leaver's GMP to 5% per annum.
- The State Scheme premiums, apart from the CEP, vary with age and sex and are calculated by the Government Actuary. The assumptions made by the Government Actuary in calculating these premiums are similar to those used in calculating the contracted-out contribution rate. As GMP accrual ceased with the change in contracting-out procedures from 6 April 1997, the state scheme premiums (apart from the CEP) no longer exist. No more MLI figures are published after that date.
- In preparing the premium tables (see DSS leaflets CA 14 Appendix 3 and CA 15 Appendix 2) a model pension fund investing 65% in equities and 35% in fixed interest securities was used and standard premium tables for LRPs and ARPs/TPs were calculated, assuming a gross dividend yield of 4% per annum for equities and 9% per annum for fixed interest securities (for PRPs, only the fixed interest securities are used).
- In use, these standard tables are adjusted by a Market Level Indicator (MLI) - calculated each month by the DSS - the purpose of which is to ensure that the premium reflects the current yield on investments and so gives protection against short term fluctuations in market prices.
- SSA 86 provided that a contracted-out occupational scheme shall provide increases in payment on that part of the GMP in respect of post 6 April 1988 service. Appropriate state scheme premiums will take into consideration the provision of these increases, for example for the calculation of an LRP there are two premium tables, and similarly two MLIs, one of each to be applied to the pre-88 GMP element and the other of each to the post-88 GMP element which is subject to increases in payment.
- The MLI applicable to the post-88 GMP is known as the average MLI, and is (from April 1993) the average of the MLIs relating to all months in the five-year period preceding the month in which the event giving rise to the liability for the premium occurs.
- The 'event giving rise to the liability for the premium' means, in the case of
* TP, the date of election to pay it.
* LRP, the date of termination of contracted-out employment.
* ARP or PRP, the date the COSR scheme ceased to be contracted-out or the date of the OPB's withdrawal of their approval.
- The general equation for the State Scheme Premium is as follows:
(a) where part of the GMP was built up before 6 April 1988:
| Amount of Premium for pre - 6.4.88 GMP Liability | = | Amt from Part 1 x (MLI) of Appropriate Premium Table | x | Weekly Amt of GMP x 52 -(div) 100 accrued up to cessation of contracting out. |
(b) where all or part of the GMP was built up after 5 April 1988:
| Amount of Premium for post 5.4.88 GMP Liability | = | Amt from Part 2 x (MLI) of Appropriate Premium Table | x | Weekly Amt of GMP x 52 /(div) (Avg MLI) accrued up to cessation of contracting out. |
- The Regulations currently in force governing MLIs and the calculation of state scheme premiums are SI 1992/796 The State Scheme Premiums (Actuarial Tables) Regulations 1992. (Where the 'event giving rise to the liability for the premium' occurred before 6 April 1993, SI 1987/657 The State Scheme Premiums (Actuarial Tables) Regulations 1987 apply).
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