Pension protections
In recent years, the LGPS has seen many changes. Some of the changes included protection for certain members who were in the scheme at the time of the changes. Some of the main protections are listed below.
Reduction in pay and final salary benefits (Regulations 10)
If you joined the LGPS before 31 March 2014 you'll have membership in the final salary scheme. Your benefits for pre-April 14 service are based on your final salary when you leave your job. However, if there’s been a reduction to your pensionable pay and you leave or retire within ten years of this change; this could affect your final pay, and your retirement benefits linked to your pre-April 2014 service.
Regulation 10 of the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007 gives protection to some scheme members whose pensionable pay has been reduced within ten years prior to your last day of active membership within the pension scheme.
Regulation 10 says:
10.—(1) Subject to paragraph (2), where a member’s pensionable pay in a continuous period of employment is reduced or restricted—
(a) because the member chooses to be employed by the same employer at a lower grade or with less responsibility;
(b) for the purposes of achieving equal pay in relation to other employees of that employer;
(c) as a result of a job evaluation exercise;
(d) because of a change in the member’s contract of employment resulting in the cessation or restriction of, or reduction in, payments or benefits specified in the member’s contract of employment as being pensionable emoluments; or
(e) because the rate at which the member’s rate of pay may be increased is restricted in such a way that it is likely that the rate of the member’s retirement pension will be adversely affected
If you fall into the above category, to make sure your benefits are worked out using the best possible pay, you can:
- Choose to have your benefits worked out on the best year’s pay in the last three years.
- Choose to have your benefits based on the best three year average in the last ten years if you received a pay cut from your employer. This option is known as a request under regulation 10 of the LGPS regulations 2008. For this regulation to apply, your employer must have caused your pay to be reduced or restricted in your employment, and you must ask for this from your employer no later than one month before you leave the scheme. You’ll need to contact your employer to make sure your correct final pay details are passed on to us. If you choose the average of the last 10 years, it is calculated by dividing three of your total annual pensionable pay in any three consecutive years of the your choice, ending with 31st March, within the period of thirteen years ending with the your last day as an active member.
It’s your responsibility to ask for Regulation 10 to be used when working out your final pay. Please make sure you keep any paperwork about your pay cut, as you may need to provide details in the future.
Rule of 85
The rule of 85 protects some or all of your benefits from early payment reduction. To have rule of 85 protection you must’ve been a member of the LGPS between 1 April 1998 and before 30 September 2006. Also, your age at the date when you take your pension when added to your scheme membership (each in whole years) must add up to 85 years or more.
The protection doesn’t automatically apply if you choose to take your pension at or after age 55 and before age 60.
If you wouldn’t satisfy the rule of 85 before you are 65, all your benefits would be reduced if taken before normal pension age. The reduction will be based on how many years before your normal pension age (age 65 for pension built up to April 2014 and before your state pension age for pension built up from April 2014) you draw your benefits.
If you’ll be age 60 or over by 31 March 2016 and choose to draw your pension between age 60 and your normal pension age, then the benefits you build up to 31 March 2016 won’t be reduced. But, if you qualify for the full rule of 85 protection to 31 March 2016 and you decide not retire until after 31 March 2016, any benefits accrued on and from 1 April 2016 will be reduced if you retire before your state pension age.
More information on the Rule of 85 is available on the national LGPS member website.
Underpin
When the LGPS changed on 1 April 2014 a protection was introduced called the underpin. The underpin applies to you if:
- you were paying into the LGPS on 31 March 2012
- you were within ten years of your normal pension age on 1 April 2012, or you were an active member of a different public service pension scheme on 31 March 2012 and within ten years of age 65 on 1 April 2012, and then joined the LGPS and transferred your benefits into the new LGPS scheme, whereby part or all of that transfer buys final salary benefits in the LGPS, subject to certain conditions; and
- you haven’t had a disqualifying break in service of more than five years
- you’ve not drawn any benefits in the LGPS before normal pension age
- you leave with an immediate entitlement to benefits.
The underpin won't apply if you opt out of the scheme before your protected normal pension age (65) or before the scheme changed. Also, it may not apply if you voluntarily draw benefits at a time when you would have needed your employer's consent to do so under the pre-1 April 2014 scheme (normally pre age 60). If you are covered by the underpin, we will carry out the underpin check when you retire.
More information on the underpin is available on the national LGPS member website.
