The Benefit Cap, also known as the 40-year rule, is a limit on the amount of pensionable service an individual may accrue across all pre-existing public service pension schemes (non-Single Scheme terms) to a maximum of forty years or equivalent. It was introduced under section 52(6) of the Public Service Pensions (Single Scheme and other Provisions) Act 2012 (‘the 2012 Act’).
Under most pre-existing public service pension schemes, pension accrual is limited to a maximum of 40 years’ reckonable service (certain fast accrual pension schemes account for service differently).
The 2012 Act extended that limit so that a public servant who holds an entitlement to receive pension benefits from one or more than one pre-existing public service pension scheme would have their total pensionable service across all such schemes limited to a maximum of 40 years or equivalent when calculating the benefits payable under those schemes.
Section 52(7) of the 2012 Act included a protection for any public servant who had accrued more than the equivalent of 40 years’ pensionable service at the date of passing of the 2012 Act. This means that any person who had accrued more than 40 years’ service or equivalent up to 27 July 2012 across pre-existing public service pension schemes, may continue to have their pension benefits calculated by reference to their pensionable service accrued up to that date.