Changes to your job

As a Career Averaged Revalued Earnings (CARE) pension scheme the pensionable pay you receive is crucial in determining the level of pension benefits that you build up within the LGPS. If your pensionable pay reduces the amount of annual pension you build up will also reduce. 

If you contributed to the LGPS before 1 April 2014 your pension is calculated differently but may also be impacted on a reduction in your salary. If you have membership of the LGPS before 1 April 2014 your pension will be built up based on the final salary regulations. 

The information below will explain how a reduction in your annual pensionable pay or full-time equivalent grade will affect your pension build up under the pre and post 1 April 2014 LGPS regulations: 

Post 1 April 2014 membership (CARE Scheme) 

Since 1 April 2014 the pension build up has been based on a Career Average Revalued Earnings (CARE) pension arrangement.

Under the CARE scheme your pension is based on the pensionable pay you earn in a 12 month period - from 1 April to 31 March. If your pensionable pay reduces this will have an impact on the amount of pension you build up - this could be due to a reduction in your hours or pay grade. 

Pre 1 April 2014 membership (Final Salary Scheme) 

Any membership built up within the LGPS before 1 April 2014 will be based on your future final pay. Whilst your final pay will normally be the average full-time equivalent 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 you:

The options that are available do rely on your own personal circumstances and this is by no means an exhaustive list:

• How close are you to retirement age
• How much scheme membership do you have
• Do you satisfy the 85-year rule
• How old are you
• By how much is your pensionable pay being reduced

Option 1 - Use the best final salary out of the last three years pay (regulation 8(2))

This option is particularly important if you are within 3 years of retirement. If you are more than 3 years from retirement, this option will not apply.

When calculating your final pay, your employer will provide the average full-time equivalent pay you have received over the last 12 months of your employment. For example, if your leaving date from the LGPS is 31 August 2026, your final pay period would be 1 September 2025 to 31 August 2026.

Your employer is required to provide us with the ‘best of the last 3 years’ final pay. This means they will also assess your final pay for the previous two years and use whichever is the highest.

Using the same example, the following periods would be considered:

Year 1: 1 September 2025 to 31 August 2026
Year 2: 1 September 2024 to 31 August 2025
Year 3: 1 September 2023 to 31 August 2024

The highest value from these three periods will be used as your final pay.

Option 2 - use the best consecutive 3 years in the last 10 (regulation 10(4))

This option will be of interest to members who are within 10 years of retirement at the point from which their full-time equivalent 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 your pre 1 April 2014 benefits. The calculation is the highest average salary of 3 consecutive years (from 1 April to 31 March) within the last 10 years.

Please note that we must receive your request in writing (email is acceptable) if you would like us to consider this option when calculating your final pay.

Option 3 - Defer accrued benefits to date and start again

If you are not protected under options one and two above 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 your 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 CPI - 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 regulations and therefore no longer have any 85-year rule protections on the 'new' membership. 
• If you were to be made redundant (assuming you are aged 55 or over) in the future having deferred part of your benefits, those deferred benefits would not be brought into immediate payment and would remain deferred. Had you continued your membership despite the reduction in pay, the whole of your 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 your '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 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

If you suffer a reduction to your pensionable pay for whatever reason it would be advisable for you to contact the pension team to discuss the options available.