Calculation of Pension Fund value : Standard capitalisation factor of 20

Can anyone clarify the basis on which the standard capitalisation factor (SCF = 20) is determined to convert a DB pension into an equivalent lump sum for the application of the Standard Fund Threshold.

Does it assume that subsequently the pension is index linked or has a spousal protection element?

If one doesnt have such features in ones DB plan then surely a lower cap factor would apply and is this a basis for challenging the fairness of the application of the SCF in such an indiscriminate manner ... if so who would one challenge it with ? ... is there an ombudsman that one can approach for such revenue related issues? ( I am assuming that the pensions ombudsman has no jurisdiction over the issue)

Any thoughts?

It's completely arbitrary, but probably a reasonable average value.

A 20:1 capitalisation factor is what is used in the UK for valuing DB pensions under their equivalent of tne Standard Fund Threshold.

Adopting a single 20:1 and ignoring whether there is an attaching spouses pension or post retirement indexation or when the individual retires, is clearly unfair. When one looks at the number of senior civil servants who retired recently with pensions payable from mid-50's and with attaching spouses pensions and indexation, the market value capitalisation factor should have been closer to 35:1.

But guess who makes the rules?????