Reductions or restrictions in pay

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Unfortunately, some members of the Local Government Pension Scheme (LGPS) do suffer a reduction or restriction in pay after a change to their contract of employment. If this should happen to you, how is your pension affected?

If you have membership of the LGPS after 1 April 2014, your pension based on that period, will be calculated using your Career Average Re-valued Earnings (CARE). The rules of the CARE scheme do not provide for any protection in the event of pay reduction or restriction after 1 April 2014.

However, if you joined the LGPS before 1 April 2014, your 'final salary benefits' based on the period from when you joined up to and including 31 March 2014, will still be calculated using your final pay at your date of leaving, as defined under the Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007.

In calculating your 'final salary benefits,' your final pay will be:

  • the total pay on which you paid pension contributions in your last 365 days of employment, or
  • one of the previous 2 years if higher, or
  • the average of any 3 consecutive years’ pay in the last 13 years of employment (ending on a 31 March) if you suffer a prescribed pay reduction or restriction within 10 years of your date of retirement or the date you left the Scheme.
 
 
Using your final pay to calculating your 'final salary benefits'
 
When you leave the LGPS, your employer will provide the Fund with your final pay as defined in the Final Salary scheme, if you joined the LGPS before 1 April 2014.
 
Your employer will automatically provide your final pay as:
 
  • the total pay on which you paid pension contributions in your last 365 days of employment, or
  • one of the previous 2 years if higher.
 
If you suffered a pay reduction due to one of the prescribed circumstances, and want the average of 3 consecutive years’ pay in the last 13 years of employment to be taken into account in calculating your final pay, you must contact your employer at least one month before the date that you are leaving the LGPS.
 
 
Examples of members suffering pay reductions in their last 10 years of pensionable employment