Changes to your job
In this section you will find information on how a change in your job may affect your pension benefits. Some of the topics included refer to changing your hours of employment and taking a drop in salary. You can also find out what happens to your pension contributions if you have a leave of absence.
Leaving the Local Government Pension Scheme
On leaving the scheme without an immediate entitlement to receive your benefits, you will have following options:
- Deferred benefits
- Transfer to another local government pension fund if you take up further employment with an employer who participates in the LGPS
- Transfer to a non-local government pension scheme such as a new employer's scheme or even a personal pension plan
- Refund of pension contributions (if you have less than 2 years of scheme membership including any membership you may have transferred into the scheme from other pension schemes)
Change of hours
If you change your weekly hours or term-time weeks of employment the benefits you build up within the scheme will be affected as, since 1 April 2014, it is your actual earnings that are used to determine the amount of pension you build up.
For the majority of our members we class part-time employees as anyone whose contractual hours of work are less than 37 per week for 52.143 weeks of the year.
A part-time employee may also be someone who works 37 hours per week but for less than 52.143 weeks of the year such as an employee of a school who works during term-time only.
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Changes to your salary
As a career averaged revalued earnings (CARE) pension scheme the pensionable pay received by a scheme member is crucial in determining the level of pension benefits that the member will receive.
In addition, a member who contributed to the scheme before 1 April 2014 will have their benefits built up to 31 March 2014 based on their final pay when they come to leave their pensionable employment or retire from the scheme.
Whilst a scheme member's final pay will normally be the pensionable pay received during the last year of employment this is not always the case and, in such instances, there are various options available to the scheme member as to how their final pay is calculated for the purposes of determining their pension benefits.
If you experience a reduction in your salary there are a number of options available, but they somewhat rely on your own personal circumstances and this is by no means an exhaustive list:
- how close you are to retirement age
- how much scheme membership you have
- do you satisfy the rule of 85?
- how old you are
- by how much is your pay being reduced?
Option 1 - Use the best of the last three years pay (regulation 8(2))
This option will be of particular importance to employees who are within three years of retirement. If you are more than three years from retirement this option is of no use.
Option 2 - use the best consecutive three years in the last thirteen (regulation 10(4))
This option will be of interest to any employee who is within 10 years of retirement at the point from which their pay is reduced but more than 3 years from retirement. If you fall into this category you can elect, in writing, to have a previous rate of pay used to calculate their benefits.
Option 3 - Defer accrued benefits to date and start again
If you will not be protected under options 1 or 2 you can elect to defer your accrued benefit to date based on your pay before any reduction is applied and then continue to contribute to the scheme on their lower pay thereby accruing further benefits.
There are some considerations to take into account, however, when choosing this option:
- The deferred benefits go up in line with the consumer price index. Pay will go up in line with pay awards.
- By 're-joining' the scheme you are treated as being a new scheme member under the 2008 regulations and therefore lose any rule of 85 protections on the 'new' membership that you may have built up under the 'old' membership. Whilst the 'old' membership will be unaffected and still payable from the member's eligible retirement age, the benefits based on the 'new' membership will be actuarially reduced if taken before the age of 65.
- If you were to be made redundant (assuming aged 55 or over) in the future having deferred part of their benefits, those deferred benefits would not be brought into immediate payment and would remain deferred until the age of 60 at the earliest. Had you continued your membership despite the reduction in pay, the whole of these benefits would be brought into payment immediately upon redundancy.
- If you were to be retired due to permanent ill health in the future a separate decision to release the deferred benefits would have to be taken by the 'former' employer.
- You can only elect to merge your deferred benefits with your ongoing membership within the first 12 months of re-joining the scheme. If your final pay ultimately exceeds the rate of pay on which your deferred benefits were calculated, plus pensions increases, the two periods of membership cannot be merged.
- Similarly, if you transfer to another LGPS in the future it is only the latest period of membership that can be transferred to the new scheme. The previous period will remain deferred.