PPF updates actuarial rates sooner than planned amid rising interest rates

The Pension Protection Fund (PPF) has updated its actuarial factors earlier than expected due to rising interest rates.

The PPF updates its actuarial factors each year to make sure that they're actuarially equivalent, taking into account external influences, such as movements in financial markets and changes to life expectancy.

However, because of rising interest rates, the PPF announced that it has had to update them again sooner than usual.

The changes will affect members who choose to retire on or after 1 March 2023, with those who take their payments at normal pension age with a tax-free lump sum expected to receive a smaller lump sum for the same amount of annual compensation given up.

Those taking early retirement, meanwhile, will result in a lower level of compensation each year than using the current factors.

For savers that plan to take a tax-free lump sum alongside early retirement, the new factors will also result in a smaller lump sum and a lower level of compensation each year.

The new factors will mean that those taking late retirement will receive a higher level of compensation each year than using the current factors.

However, it is "more complicated" for those taking late retirement alongside a tax-free lump sum, because the new factors are less generous for lump sums, and more generous for late retirement.

The PPF therefore encouraged those over 55 to use its online Quote and Retire tool to see their potential levels of compensation under the new and existing factors, and to understand how cash lump sums or ongoing payments may change if they decide to retire before or after 1 March 2023.

Members who have already started taking their PPF payments and members of the Financial Assistance Scheme (FAS) won’t be affected.

    Share Story:

Recent Stories

Are current roads into retirement delivering member value?
Laura Blows explores HSBC Master Trust’s recent report, Converting pension pots into incomes, with HSBC Retirement Services CEO, Alison Hatcher.

Savings and finance at retirement
Laura Blows is joined by Claire Felgate, Head of Global Consultant Relations, UK, at BlackRock, to discuss savings and finance at retirement. Please click here for an edited write-up of the video

Making pension engagement enjoyable through technology
Laura Blows speaks to Nick Hall, business development director and Chartered Financial Planner at UK-based Wealth Wizards about the opportunities that technology provides for increasing people’s engagement with pensions and increasing their retirement wealth. Please click here for an edited write-up of the video

Pension portfolios – the role of asset-backed securities
Laura Blows is joined by Royal London Asset Management (RLAM) head of sterling credit research, Martin Foden, and its Senior Fund Manager, Shalin Shah to discuss the role of asset-backed securities (ABS) within pension fund portfolios
Incorporating ESG into fixed income
Laura Blows is joined by TCW head of fixed income ESG, Jamie Franco, to discuss incorporating environmental, social and governance (ESG) strategies into fixed income portfolios