Hidden costs and repayment periods

The hidden cost (sometimes known as the capital cost) is the upfront cost the employer has to pay for agreeing to bring a member’s pension into payment early.

The hidden cost is to recuperate an amount from the employer for the loss of investment return and contributions received as well as the cost of paying the pension for more years.
This amount is not meant to be accurate but more as a token to keep the fund funded. Therefore if the member dies one year after retirement, you will still be asked to pay the full amount of hidden costs.

The repayment period determines the maximum period the employer can pay the total hidden cost for.

The formula to calculate the maximum repayment period is:

• The lesser of five years or
• The period starting from the day after retirement to the later of:
  • age 60 or
  • The earliest retirement date.
     

You can get an estimate of the hidden cost for an individual retirement, for more details see the Requests for Early Retirement Costs page.

The Pensions Investment team will contact you shortly after retirement to confirm the hidden cost and the repayment period.