Redundancy and Unreduced Pension in LGPS

Gidoloi · 4 October 2015 at 4:59PM

Anyone confirm this for me? I'm 58, work in Local Government and I'm in the LGPS with over 34 years under my belt. With our Mortgage not finishing for 3 years I need to continue working up to then and then retire. Now it looks like there may well be redundancies coming our way. I'm obviously concerned at that and have been checking things out. It seems to me that there is a possibility of being made redundant with an "Unreduced pension"....does that mean they might lay me off but I'll get my full pension as if I worked to 65? Plus a redundancy payment? That would be too good to be true for me!!! Can anyone confirm/advise?

Drp8713 · 4 October 2015 at 5:05PM

Not quite, you would get the pension you had accrued to the day you are made redundant, paid without any reductions for early payment.

Plus your redundancy payment.

Happier_Me · 5 October 2015 at 7:03AM

I don't believe your pension is enhanced but you will receive this entirely unreduced if you go as part of a redundancy process. It's likely you will receive more pension if you go sooner through redundancy rather than wait until you are 61.

If you leave at 61, you will have some protection via the rule of 85 (a rule that applies from the age of 60 for those with 25 years or more in the LGPS) - all of your pension accrued prior to 2008 will be paid unreduced. However, pension accrued after this date will be subject to a reduction of around 5% per annum as you are leaving before you scheme pension age.

I would ask for a couple of estimates from your pension scheme administrators. A pension estimate if you were to leave at 61 and a pension estimate if you were to leave due to a redundancy situation now.

You then need to work out if you can live for the next few years on your pension plus redundancy as opposed to your current salary.

Gidoloi · 5 October 2015 at 1:49PM

Additional query:

I asked the pension fund for my figures last March and they sent me back the estimates. Further to my previous questions, and the helpful answers I wonder if you can clarify this for me:
The Figures I got back are Roughly this:

Final Salary Benefits up to 2008 = £11035
Final salary from 2008 = £3500
CARE Pension = £1406
Less Reduction Due to Early Payment = £1700
Total Annual Pension = £14200

My Question is, is that reduction of £1700 an Annual amount? And therefore, If I get made redundant rather than going voluntarily or retiring early...will I actually be better off by £1700 a year?

TIA.

hyubh · 5 October 2015 at 2:10PM

Gidoloi wrote: »

The Figures I got back are Roughly this:

Final Salary Benefits up to 2008 = £11035
Final salary from 2008 = £3500

Presumably it was '2008 scheme benefits' rather than 'benefits up to 2008'? Otherwise 'final salary from 2008' is wrong and there should also be a line for 'final salary benefits 2008 - 2014'.

CARE Pension = £1406
Less Reduction Due to Early Payment = £1700
Total Annual Pension = £14200

My Question is, is that reduction of £1700 an Annual amount?

Yes, and it looks like you have a large amount of 85 year rule protection, otherwise the reduction would have been rather higher - £1700 is only 11% of £14,200.

And therefore, If I get made redundant rather than going voluntarily or retiring early...will I actually be better off by £1700 a year?

Yes, though the difference will progressively narrow the longer the redundancy is drawn out. On the other hand that makes it more likely your request for VR would succeed since it will cost your employer less, notwithstanding their 'strain cost' would be calculated on a different basis to your actuarial reduction.

Gidoloi · 5 October 2015 at 2:17PM

Right!!! Thanks a lot, that's really helpful....I tried ringing our fund office but they're clearly inundated. I started work in LG in 1981 so you're right, a lot is under the Rule of 85. So...what I need is for the LA to make me redundant as quickly as possible with no fight from me, or being tempted to take a VR package (obviously dependent on how much). After this is all done and dusted, apart from tax considerations, I presume I can sell my services back to them as an Agency worker or an independent worker? This is all crazy....and loads of my colleagues will be frantic, but it looks like I'm serendipitously in a pretty good position...

Gidoloi · 5 October 2015 at 2:18PM

BTW...what is their "strain cost"?

Gidoloi · 5 October 2015 at 2:24PM

Whilst I'm here, I wonder if you could help me with this too. Back in about 1983, when Thatcher introduced "opting out" of Local Government Pension Schemes my wife was working for a Voluntary Agency that nevertheless was Co-opted into the LGPS. Without any consultation, the finance officer of the Agency urged/recommended/just did it....people to opt out of the LGPS and transfer their pensions to Standard life. At the time my wife was 21, had 4 years contributions and didn't really know what the implications were....if there were any, they were supposed to be good. That clearly isn't the case.....do you think she could go the the Pensions Ombudsman and claim this transfer was effectively a "Misselling"?

AlanP_2 · 5 October 2015 at 5:29PM

Gidoloi wrote: »

BTW...what is their "strain cost"?

Probably not totally accurate from a technical point of view but in simple terms there is a "cost" to you taking your pension early with unreduced benefits.

Your employer will have to cover this otherwise all the other pension scheme members would be subsidising you.

The scheme admin people will work out the "strain cost" on the scheme and your employer will factor that in when it works out how much it will cost them to make you redundant and then compare total cost to the savings they anticipate they will make from the re-organisation or whatever.

System · 6 October 2015 at 8:26AM

Hiya

Vaguely remember there being people who were 'mis-sold' and moved to the private sector from the LGPS. Later re-instated fully to the LGPS.

YES you should ask, although time limits may apply.

"STRAIN" is what the pension fund is paying out early because of redundancy. An invoice is sent to the employer to cover such an amount.
EG:£55,000.00 but in some cases the fund will allow this spread over 2 or 3 years, as the total for a VR exercise can be costly.

Redundancy and Unreduced Pension in LGPS

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