ReductionsinPensionablePay

ThisinformationbelowisintendedforLGPSmembersworkingforanyonewhosepay hasbeenaffectedby a job evaluationexerciseor areduction in pay.

Calculating FinalPay

TheLGPSis a finalsalarypension schemewithpensionbenefitsbasedontheperiodofmembershipand‘finalpay’.

Final pay

Finalpayisnormallythepayreceivedinyour last 12 months of employmentthatyoupaypensioncontributionson.Ifyouare a parttimeworkeritisthefulltime equivalent pay that is used.

However,theSchemerulesallowpensionbenefitstobecalculatedononeoftwodifferentbasesshouldthey prove beneficial for the member:

1).‘Bestofthe Last 3 years’ Rule

Youremployershouldautomaticallychecktoseeifyourfulltimeequivalentpayforeitherofthetwoyearsimmediatelyprecedingthefinalonegives ahigherfigure.Ifeitherofthesefiguresishigher,thehighestfigureshouldbeused by your employer.

2).Averageof 3 Consecutive Yearsfromthe Last13 Years.

Intheeventof a reductioninpensionablepaymadewithin10yearsofthedateofretirementorleavingtheSchemeyoucanrequestforthe:

Annualaverageofthebestthreeconsecutiveyearsofpensionablepayending31March,within a periodof13 years,endingwiththelastdayofSchememembershiptobeused.

Thismeansifyouhave a reductionin basicpayon 1 April2013(afterthe 3yearspayprotection)andyouleavetheSchemeonorbefore31March2023(within 10 years), the calculationofthefinalpaywouldbebasedonthe

annual average of the best three consecutive years, withinthelast13yearsofSchememembership(ending31March).

Fullprotectionwouldlastfor10yearsfromthedateofthereductioninpayandendon31March2023.

Pleasenotethatpensionableallowances and enhancements are not subjecttopayprotectionfrom 1 April2010 sothe10yearsprotectionendson31March2020.

ExamplesFAQs

Example 1 (Bestof thelast 3 years)

JoeleavestheSchemeon30November2009.HispensionablepaywaslowerinhislastyearsotheSchemerulesallowforeitheroftheprevious 2yearstobeused.

Joe’slastthreeyears’pensionablepaywas:

1 December2008to30November2009 = £15,950

1 December2007to30November2008 = £15,880

1 December2006to30November2007 = £16,130

InJoe’scase,thefinalpayusedinthecalculationofhisbenefitsis£16,130andthisisincreasedforinflationbytheConsumerPriceIndex(CPI)from 1December2007todateofpayment.

Example 2 (Averageofthreeconsecutiveyearsinthelast13)

Trevorsuffers a reductiontohispensionablepay.Trevor’spayisreducedfrom 1 April2010buthasthreeyears’ payprotectionsohispensionablepayreducesfrom 1 April2013.The10-yearprotectionstartson 1 April2013andendson31March2023.

Thecalculationismadebytakingthehighestthreeconsecutiveyearspensionablepay(ending31March)withinthelast13yearsofSchememembership,anddividingthisbythree.

Thefigureisincreasedforinflation(byCPI).

1 April2022to31March2023 = £17,540

1 April2021to31March2022 = £17,230

1 April2020to31March2021 = £16,990

1 April2019to31March2020 = £16,680

1 April2018to31March2019 = £16,220

1 April2017to31March2018 = £15,990

1 April2016to31March2017 = £15,640

1 April2015to31March2016 = £15,230

1 April2014to31March2015 = £14,750

1 April2013to31March2014 = £14,440

1 April2012to31March2013 = £19,870

1 April2011to31March2012 = £19,320

1 April2010to31March2011 = £18,860

Inthiscasethethreeyearsbeforethepayreductionareusedtogive a finalpayfigurecalculatedas:

18,860 + 19,320 + 19,870 =£19,350

In Trevor’s case, his final payis £19,350 and thisisincreasedforinflation(byCPI)from 1 April2013todateofpayment.

HowlongisTrevor’sfinalpayprotected?

Trevor’s final payis fullyprotected ifheretiresorleavestheSchemeonorbefore31March2023.

If Trevor continues to work after 31 March2023,hemaydecidetooptoutofthePensionSchemeinMarch2023toprotecthisfinalpay.However,optingoutofthePensionSchemehasotherimportantimplicationsthathewouldneedtoconsider.(SeeBelow).

TrevorneednotdecideaboutoptingoutuntilMarch2023.

WhatwouldhappenifTrevorcontinuedinthePensionSchemeafter31March2023?

Trevor’sfinalpaywouldnotbeprotectedbecauseheisoutsideofthe10-yearprotectionperiod.

What if pensionable payreducesfrom 1 April2010as a resultof a dropinpensionableallowancesand/orenhancements?

Pensionablepayforthepurposeofcalculatingpensionbenefitswillbefullyprotecteduntil31March2020.

What are the implications of opting out?

ThereareseveralpotentialdisadvantagesthatyouneedtoconsiderwhenthinkingaboutoptingoutofthePensionSchemeandhavingpreservedbenefits.

1.Ifyouweremaderedundantatage55orlater,onlythepensioncalculatedfromtheperiodofmembershipfromthepointofrejoiningwouldbepayableimmediately.

Whilstthepreservedbenefitscouldbepaid at age 60 or later, they may bereduced to reflect early payment,orpaidunreducedatage65.

2.Ifyouhadtoretireonillhealthgroundsfromthesamejob,preservedbenefitsmaynotbepayable.Thiswould dependonthelevelofincapacityascertifiedbytheOccupationalHealthdoctor.

3.Evenifyoucouldhaveretiredat 60withunreducedbenefits,byoptingoutandthenrejoining,thebenefitsforthefutureperiodofmembershipwouldonlybepayableinfullatage65.Whilstthe preservedbenefitscouldbepaidat

age 60 or later, they may be reducedto reflect early payment, or paidunreducedatage65.

4.IfyoudiedandhadnotrejoinedtheSchemeatthatpoint,thelumpsumdeathinservicedeathgrant(3 x annualfinalpay)wouldnotbepayable.

5.Anyfuturepayincreasesyoureceivefrompayawardsandpromotionwillnotbeusedinthecalculationoffinal pay for your preserved benefits.

For a reductioninbasicpayyoudonot needtodecideaboutoptingoutuntilMarch2023.

Ifyourpensionablepayreducesbecauseof a reductioninpensionableallowancesorenhancementsyouneednot decideaboutoptingoutuntilMarch2020.

What if final payis alreadyprotectedfollowing a dropinpensionablepaythathappenedbefore 1 April2008?

Example3:

Ruthhad a permanentdropinherpensionablepaybeforeApril2008andwasissuedwith a Certificate of Protectionofpensionbenefits.

Ruth’sfinalpayisalreadyprotectedby this certificate and either of thefollowing can beusedinthecalculationofherfinalpay,

  • thehighestfinalpayinthelast 5 yearsor
  • thehighestconsecutivethreeyearspensionablepayinthelast13yearsincreasedbyCPIanddividedby 3 togiveherfinalpay

WhathappensifRuthnowsuffers afurther reduction to her final pay?

Ruthwillnowhave 2 typesofprotection.

RuthwillstillretainprotectionfromherCertificateofProtection of pensionbenefitsandnowhasfurtherprotectionundertheSchemerulesfollowingherreduction in pensionable.

Can a CertificateofProtectionofpensionbenefitsbe issued ifpayreducesinfuture?

No.Onlymemberswhosuffered a permanentreductioninpensionablepaybeforeApril2008andwhowereissuedwith a CertificateofProtectionofpensionbenefitsbeforethatdateareprotectedunderthepreviousSchemerules. No further certificates may be issued.

FURTHERINFORMATION

More information about the Local GovernmentPensionSchemeisavailableat

IMPORTANTNOTE:WiltshirePensionFundcannotprovidefinancialadvice.Ifyouneedadvicebeforemaking a decisionregardingyourpensionbenefits,youmaywishtocontactanIndependentFinancialAdviser.

April 2010