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The Club means those who move between Club schemes can transfer their pension on special terms, so they will receive a similar amount of pension in their new scheme, regardless of any increase in salary.

The law requires pension schemes to offer a minimum ‘transfer value payment’, which must be equal in value to the benefits you’ve already built up when you move jobs. This is known as a ‘cash equivalent transfer value’. The scheme that receives the cash equivalent transfer value must then offer benefits of the equivalent value as the previous scheme. Transfers calculated on a Club basis will usually offer a higher value than those calculated on non-Club terms.

Pension transfers to non-club pension providers

When you ask for a transfer of your pension benefits, the old pension scheme works out a cash value of your benefits. They base it on your final salary at the point of leaving and allow for pensions increases up to retirement. Preserved public service pensions are usually increased in line with inflation, but this is less likely in the private sector. This makes a noticeable difference when inflation is at more than 5%.

The scheme receiving the transfer payment must offer benefits of an equivalent value, but they base the service credit on your salary in your new role. They also apply factors which allow for expected salary increases. So even when the two schemes are similar in structure, the result is generally a lower service credit in the new scheme, especially if the new job pays a higher salary.

The differences are most noticeable with younger employees who have the longest to go until they retire, and who will therefore get more pay rises over the years.

Transfers to Club pension providers

The transfer value calculation is generally the same as for a non-Club transfer. The difference is that the new Club scheme works out the service credit using a set of standard tables that all Club schemes use. The Club arrangements also require the new scheme to use the member’s salary in the old scheme when working out the service credit, regardless of any salary increase in their new role.

Because of this, if the benefits of the two schemes are identical and if all the member’s service in the previous scheme was covered for spouse’s and civil partner’s pension benefits, the member will receive a like for like service credit. If the two schemes have major differences, such as a different pension age or accrual rate, then the service credit will be adjusted to ensure that the member receives benefits of equal value to those in their previous scheme.

A club transfer may not be more beneficial than non-club if you:

  • take a large pay cut on joining their new scheme; or
  • have substantial benefits in your old scheme, are close to pension age when you join your new scheme and intend to work beyond normal pension age.

You should also bear in mind that:

  • Club membership does not require that all Club schemes have the same benefit structure; and
  • qualification for pension scheme and early retirement benefits will depend on the provisions in each scheme’s rules.

Club employers

Despite being called the Public Sector Transfer Club, private sector schemes can participate if:

  • They are salary related occupational schemes
  • They have full HM Revenue & Customs approval
  • The scheme’s trustees or managers agree to comply with the Club arrangements
  • The scheme is contracted out of the State Second Pension – formerly SERPS (a requirement since 1997).

List of Public Sector Transfer Club members

Career average pension schemes

In a career average pension scheme, you will usually earn a pension based on a percentage of your earnings each year, up-rated annually in line with prices. Career average schemes may still belong to the Transfer Club if they can accept a Club transfer in, on a final salary basis.

Added pension

Many Club schemes allow members to buy additional benefits in the form of added pension. You pay an agreed sum for a specific amount of extra benefits, which increases each year in line with prices.

Because the amount of that pension is not determined by your final salary, Club transfer terms do not apply. Therefore, if you transfer to another Club scheme, your normal, final salary-based benefits would be transferred on Club terms, and your added pension benefits transferred on non-Club terms.

Earnings cap

The earnings cap was HMRC’s limit on pensionable earnings, and it was removed from 6 April 2006. However, some schemes may choose to impose their own limit on pensionable earnings.

In order to maintain a consistent approach for Club transfers, any service which was subject to a cap in the old scheme will continue to be subject to the cap in the new scheme.

The Government Actuary’s Department will work out a Club earnings cap, which is up-rated each year, for all Club schemes to use for Club transfers (schemes may adopt a different approach for non-Club transfers).

If your transferred service is subject to a cap, both the transfer value worked out by the old scheme and the service credit worked out by the new scheme will be based on the Club earnings cap in force at the time, rather than scheme-specific caps. If your service was not subject to a cap in the old scheme, your actual salary will determine both the Club transfer value and the Club service credit.

Published:
4 January 2022
Last updated:
21 February 2022