LGPS & DB Pension Annual Allowance Queries

AlanP_2 · 6 December 2017 at 3:22PM

My OH hworks in Local Gov't and is in the LGPS with pre-2008, pre-2014 and CARE pension accrued.

She has been offered a new role, with an LGPS Admitted Body (ex LA organisation spun out as a Trust) on a lower salary.

She is going to take it as the role appeals to her.

My query is around the LGPS pension and Annual Allowance.

There is a realistic chance that although initial salary is lower it could increase to at least the same level, maybe more, within a few years. The plan is to "link" the pension records so that it stays as one pension with pre-2014 service linked to her eventual Final Salary.

This means that in the 2018/19 Tax Year the growth in the value of her DB benefit will actually be negative!

I assume you can't have a negative Annual Allowance figure so will it be zero?

Just trying to work out whether this opens a window of opportunity to add a lot to her linked AVC as at the moment we are up against the £40k annual limit with no carry-forward to use up.

As a hedge against salary not growing as hoped for can the pre-2008 and/or pre-2014 Final Salary be calculated by "Best 3 out of Previous 10 years" or similar?

Thanks

Silvertabby · 6 December 2017 at 3:46PM

As a hedge against salary not growing as hoped for can the pre-2008 and/or pre-2014 Final Salary be calculated by "Best 3 out of Previous 10 years" or similar?

It depends on how your LGPS interprets the rules. The LGPS I worked for would only apply 'best of last 3 years only' in your wife's case, as it was her choice to take the lower paid role. The extra protection of 'best 3 year average over last 13 years' (but with a 10 year protection period) was reserved for those who had had no option but to take a lower salary.

I would refer your AA query to your wife's LGPS provider. Because it's so complex, they should have a couple of people who specialise in these queries.

hyubh · 6 December 2017 at 5:34PM

Silvertabby wrote: »

It depends on how your LGPS interprets the rules. The LGPS I worked for would only apply 'best of last 3 years only' in your wife's case, as it was her choice to take the lower paid role. The extra protection of 'best 3 year average over last 13 years' (but with a 10 year protection period) was reserved for those who had had no option but to take a lower salary.

I'd say the 2008 scheme regulations are pretty clear here in stipulating that policy (http://lgpsregs.org/timelineregs/LGPS2008Regs/SI20140044/20071166.htm#reg10).

AlanP_2 · 6 December 2017 at 6:31PM

hyubh wrote: »

I'd say the 2008 scheme regulations are pretty clear here in stipulating that policy (http://lgpsregs.org/timelineregs/LGPS2008Regs/SI20140044/20071166.htm#reg10).

Thanks. If I've read that right then average of the "Best 3 in last 13" would count?

May be clouded by the fact that it is not the same employer so continuos employment may not apply.

I should have said the Trust has been running for a good few years now so it isn't a TUPE transfer, it is resign and join new employer.

Silvertabby · 6 December 2017 at 7:54PM

These regs may seem clear, but there is still 'wriggle room'. Plus the fact that OP's wife has chosen to take a lower paid post with another employer could complicate things.

To be sure, the only way would be for OP's wife to ask her LGPS provider what they would do under these circumstances.

hyubh · 6 December 2017 at 9:29PM

Silvertabby wrote: »

These regs may seem clear, but there is still 'wriggle room'. Plus the fact that OP's wife has chosen to take a lower paid post with another employer could complicate things.

I honestly don't see how that complicates things - rather, it simplifies things because there is clearly no 'continuous employment' (if there were, e.g. in the case of a school worker TUPE'd to a new academy, then there could be no election to aggregate membership periods). For sure, the final 12 month average, or the best in last 3 years, should ignore any aggregation. But this is different.

Silvertabby · 6 December 2017 at 10:28PM

All I'm saying is that the LGPS I worked for wouldn't give OP's wife the benefit of the best 3 year average over the last 13 years under these circumstances - just the best of the last 3 single years.

hyubh · 6 December 2017 at 11:32PM

Silvertabby wrote: »

All I'm saying is that the LGPS I worked for wouldn't give OP's wife the benefit of the best 3 year average over the last 13 years under these circumstances - just the best of the last 3 single years.

Good stuff, because all I'm saying is that having a contrary policy would be clearly against the regulations.

Fubbly · 7 December 2017 at 12:39AM

Silvertabby, hyubh - Thanks for your replies on this which I found helpful as I've also taken a lower paid job voluntarily, though in my case with the same Local Authority. I had assumed from the regulations that, because it was the same employer, I would automatically have the right to go to "best 3 in the last 13" should I request. Does the individual scheme have the discretion to deny me this? I'm a bit disappointed if that's the case.
AlanP - I'm no expert but my reading of the regs is that the changing of employers means that the "3 in 13" rule unfortunately doesn't apply for your OH. I'd also be interested in the answer to your main question regarding the effect on the annual allowance of a cut in salary when in a defined benefit scheme.

AlanP_2 · 7 December 2017 at 2:06PM

We will need to get an answer from the administrators by the sounds of it, and will do at some stage. This will probably be after she is in the new role when actual circumstances are clear.

It will come down to the interpretation of "continuous employment" by the sounds of it.

Fubbly - I think you would get the "3 in 13" option as you are definitely in "continuous employment" as it is with same LA.

Silvertabby · 7 December 2017 at 2:23PM

hyubh - a little off track, but 'the rules' also say that the LGPS may offer benefits in the form of a one-off lump sum under triviality rules to members who meet the criteria - but some chose not to (not the LGPS I worked for) because of the difficulties involved.

One of the main reasons was that not only were any widow's/widower's benefits extinguished by the triviality payment, but that the money in lieu of the spouse's pension was paid to the pensioner as part of the overall calculation. They were therefore covering their sixes against any complaints from widows/widowers who had been expecting a pension on the death of the pensioner spouse.

Plus, of course, the LGPS relies on a truthful answer from the pensioner re other pension rights.

The LGPS I worked for asked triviality claimants to sign a declaration re other pension rights - but it was obvious that many people just saw the amount of money offered and didn't read the paperwork properly. If I could count the times I've started the triviality process, smelled a rat, and checked with the claimant to find that they did indeed have other pension rights - sometimes with another Local Authority - but hadn't declared them 'because they thought that we were only asking about their pensions with this scheme'.

I understand that there may be changes afoot, dependant on the success of a UK wide data base showing other pension rights. That wouldn't resolve the problem of the relinquished spouses pension, though.

LGPS & DB Pension Annual Allowance Queries

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