Protecting Pension Benefits

If you were a member of the Local Government Pension Scheme before 1 April 2014, your retirement benefits in respect of membership up to and including 31 March 2014 are based on your final pay (or its whole-time equivalent if you work part-time).

This is usually the pensionable pay you receive in your final year of service or one of the two previous years’ pay if better.  However, a reduction/restriction to your pay or removal of any permanent additional payments on which contributions are made can mean a reduction in the amount of your pension benefits. 

Under the Scheme rules, however, it is possible to provide protections for members who have a reduction/restriction in pay in certain circumstances.

Where a member’s pensionable pay in a continuous period of employment is reduced or restricted

  • because the member chooses to be employed by the same employer at a lower grade or with less responsibility;
  • for the purposes of achieving equal pay in relation to other employees of that employer;
  • as a result of a job evaluation exercise;
  • 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
  • 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, the member may choose to have his or her final pay calculated on the average of any 3 consecutive years in the last 13 years (ending on a 31 March).

This cannot apply if the member

  • suffers the reduction/ restriction with more than 10 years to retirement/leaving the Scheme;
  • received the higher rate of pay in respect of a temporary increase; or
  • chooses to reduce his or her hours of work or to be employed at a lower grade, for the purposes of flexible retirement.