In recent years, the LGPS has seen significant changes to its legislation. Some of the changes included protection for certain members who were in the scheme at the time of the change. Some of the main protections are listed below.
Reduction in Pay and Final Salary Benefits (Regulation 10)
If you joined the LGPS before 31 March 2014 you will have membership in the Final Salary Scheme and your benefits, in respect of pre April 14 service, will be based on your final salary upon leaving employment. However, if there has been a reduction to your pensionable pay and you leave or retire within 10 years of this change; this may have consequences to your final pay, and subsequently to your retirement benefits linked to your pre April service.
Regulation 10 of the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007 gives protection to scheme members whose pensionable pay has been reduced within the period of 10 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 ensure your benefits are calculated using the best possible pay, you can:
- Choose to have your benefits calculated on the best year’s pay in the last three years
- Choose to have your benefits based on the best 3 year average in the last 10 years, if you have 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 request this from your employer no later than 1 month prior to your leaving the scheme. You will need to contact your employer to ensure your correct final pay details are passed onto the Pensions Team. It is your responsibility to ensure that Regulation 10 is used in calculating your final pay. Please ensure you keep any paper work relating to the pay cut, as you may be required to produce 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 have been a member of the LGPS on 30 September 2006 and your age at the date when you draw your pension plus your scheme membership (each in whole years) must add up to 85 years or more.
The only occasion where the protection does not automatically apply is if you choose to voluntarily draw your pension at or after age 55 and before age 60.
If you would not satisfy the rule of 85 before you are 65, then all your benefits would be reduced if withdrawn before your 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 will 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 will not be reduced.
But, if you qualify for the full rule of 85 protection to 31 March 2016 and you decide not to 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.
When the LGPS changed on 1 April 2014, there was a protection introduced called the underpin. The underpin applies to you if:
- you were paying into the LGPS on 31 March 2012; and
- you were within 10 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 10 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 5 years; and
- you’ve not drawn any benefits in the LGPS before normal pension age; and
- you leave with an immediate entitlement to benefits.
The underpin will not apply if you opt out of the scheme before your protected normal pension age (65) or before the scheme changed, and may not apply if you voluntarily draw benefits at a time when you would have required employer consent to do so under the pre 1 April 2014 scheme (normally pre age 60). If you are covered by the underpin, the Pensions Team will carry out the underpin check when you retire.
More information on the underpin is available on the national LGPS website – www.lgpsmember.org/more/underpin.php.