NAPS retirement and transfer values factors from 1 October 2023
The Scheme’s Actuary (an independent expert appointed by the Trustee) regularly reviews the factors used to work out specific pension options and has updated certain factors. The changes could affect pension options for members who have not yet retired or drawn their pension benefits. If you are planning to draw your pension benefits around this time, you may wish to reconsider your plans in light of these changes.
Your BA Pensions team will be able to provide retirement options in October 2023 based on the new factors.
Action you may need to take
We are making you aware of these changes as they could influence your decision about when to draw your pension. As with any important decision regarding your pension benefits, you should consider seeking independent financial advice. If you wish to draw your pension, please let the BA Pensions team know as soon as possible.
If you have already advised us of your revised retirement date for September, we will automatically contact you to reconfirm your retirement date in light of this change.
Please let us know if you recently requested a retirement quotation and would like to revise your retirement plans. We’ll prepare a new retirement quotation as soon as the new factors are available.
If you’ve received a retirement quotation for a date after 1 October, we will automatically recalculate your pension benefits using the new factors. We’ll confirm your final pension details at the end of the month in which you retire.
Taking a tax-free lump sum
From 1 October 2023, the rates for exchanging a pension for a tax-free lump sum at retirement will improve. So members who choose to draw their pension on or after that date will receive more tax-free lump sum for every £1 a year of pension exchanged. In other words, if you choose to draw your pension on or after 1 October 2023, you will need to exchange less of your pension when taking a tax-free lump sum. As an illustration, at age 60, the amount of tax-free lump sum available for every £1 of pension exchanged could be around 21% higher. However, this will vary according to your age when drawing your NAPS pension.
Drawing pension early (i.e. before Normal Retirement Age, ‘NRA’)
If you are drawing your pension before your Scheme NRA, we will reduce your pension payments to take into account that we will be paying your pension earlier. If you draw your pension on or after 1 October 2023, the reduction is expected to be broadly similar or lower, resulting in a similar or slightly higher pension. As an illustration, early retirement pensions could be up to 2% higher for members whose NRA is age 60 and who choose to retire five years before their NRA, but this will vary for each individual.
Cash Equivalent Transfer Values
If you have a deferred pension entitlement in NAPS, the cash equivalent transfer value is the cash value you have built up in a pension scheme that is available for transfer to another pension arrangement. At any time before you start to draw your pension, you can ask us to transfer the value of your deferred pension to another registered pension arrangement. There are many things to consider when deciding whether to transfer your benefits. You must usually take professional advice from an independent financial adviser before deciding whether to transfer.
From 1 October 2023, we estimate that cash equivalent transfer values available from NAPS will be up to 15% higher for members with at least 15 years remaining before reaching NRA. This will gradually reduce to around 4% higher for members who have reached their NRA. This is because the cash equivalent transfer value basis reflects the Scheme’s investment strategy of de-risking its investments, which has a greater impact on members further from their NRA.
Individual cash equivalent transfer value calculations include an allowance for current market conditions, which can vary significantly from month-to-month. So it is possible for quotations provided after 1 October 2023 to be lower, rather than higher, than quotations provided up to 30 September 2023.
A note about future factor reviews
The changes to the Scheme’s retirement factors on 1 October 2023 will generally result in higher pension benefits being paid. The Scheme’s factors are reviewed regularly, and the retirement factors may fall or rise in the future. Changes to retirement factors usually take effect from a future date and are not backdated. We always aim to give members as much notice as possible of any change to provide greater transparency and confidence when thinking about drawing their NAPS pension benefits.
From the Trustee of the New Airways Pension Scheme