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.

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