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Commutation Factors

B

barney

Member
Hi,

Typyical commutation factors would be 9 for men and 9.8 for women. Which means women are being given a higher reduced pension than men, all else being equal. But don't women, on average, live longer than men? So why would we give women the higher reduced pension?

Many thanks.
 
The commutation factor is aiming to represent the capital value of the pension being given up (to some extent). As women live longer, each £1 of pension they give up per annum should be worth more now, as we would expect their pension to be paid for longer.
 
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