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    • jem16
    • By jem16 20th Apr 17, 12:19 PM
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    jem16
    LGPS Rule of 85 question
    • #1
    • 20th Apr 17, 12:19 PM
    LGPS Rule of 85 question 20th Apr 17 at 12:19 PM
    I know we have a few LGPS experts on here so wondering if someone can help me out with this please as I've been asked by a friend for some help.

    She qualifies assuming she works until 60. However, she reduced her pay grade in Aug 14. Employer has advised her to defer at Aug 14 to link to higher final salary. Service from that date in the CARE scheme. Question is does the CARE scheme membership count for rule of 85 or does she need to amalgamate the benefits (making the pension lower but allowing unreduced pension at 60)?
Page 1
    • Silvertabby
    • By Silvertabby 20th Apr 17, 12:27 PM
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    Silvertabby
    • #2
    • 20th Apr 17, 12:27 PM
    • #2
    • 20th Apr 17, 12:27 PM
    First of all, as your friend is under 60 she won't have full R85 protections, and so won't be able to take unreduced benefits at 60 under either scenario.

    Can you post her age and dates of service? (and also advise if all of her service is LGPS, or if she has transferred in benefits from another scheme).
    Last edited by Silvertabby; 20-04-2017 at 12:30 PM.
    • jem16
    • By jem16 20th Apr 17, 12:35 PM
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    jem16
    • #3
    • 20th Apr 17, 12:35 PM
    • #3
    • 20th Apr 17, 12:35 PM
    She's 55 just now and joined in 1995. Changed jobs in 2014.

    I'll check if it's all LGPS but I think it is.

    Edit : All LGPS and no transfers in. Deferred 31.08.14. Rejoined 01.09.14.
    Last edited by jem16; 20-04-2017 at 12:39 PM.
    • Silvertabby
    • By Silvertabby 20th Apr 17, 12:56 PM
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    Silvertabby
    • #4
    • 20th Apr 17, 12:56 PM
    • #4
    • 20th Apr 17, 12:56 PM
    In that case, her R85 protections are limited to her pre 2008 service only. Her pension for service between 2008 and 2014 will be reduced if taken before 65, and her pension for service from 2014 (records combined or not) will be reduced if taken before State pension age.
    • jem16
    • By jem16 20th Apr 17, 1:01 PM
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    jem16
    • #5
    • 20th Apr 17, 1:01 PM
    • #5
    • 20th Apr 17, 1:01 PM
    Thanks Slivertabby. So basically there's no advantage or disadvantage to combining the records as far as Rule of 85 is concerned.

    Is there any advantage or disadvantage in any other way to amalgamating?
    • Silvertabby
    • By Silvertabby 20th Apr 17, 6:33 PM
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    Silvertabby
    • #6
    • 20th Apr 17, 6:33 PM
    • #6
    • 20th Apr 17, 6:33 PM
    Is there any advantage or disadvantage in any other way to amalgamating?
    As far as R85 is concerned, there wouldn't be any difference. As for the rest, it's crystal ball stuff, I'm afraid. It looks like your friend's employer is splitting her records at the point she took a drop in pay (grade) because of the final salary link - but could she get back on the higher rate before she retires? Is she definitely going to retire at 60 - or was that on the mistaken assumption that all of her benefits would be unreduced then?
    • jem16
    • By jem16 20th Apr 17, 7:01 PM
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    jem16
    • #7
    • 20th Apr 17, 7:01 PM
    • #7
    • 20th Apr 17, 7:01 PM
    As far as R85 is concerned, there wouldn't be any difference.
    Originally posted by Silvertabby
    That's clear at least.

    It looks like your friend's employer is splitting her records at the point she took a drop in pay (grade) because of the final salary link
    That was indeed the plan.

    but could she get back on the higher rate before she retires? Is she definitely going to retire at 60 - or was that on the mistaken assumption that all of her benefits would be unreduced then?
    That I'm not sure about. Obviously it's now about half of her pension that would be unreduced and half that would be reduced in different amounts.

    So basically what you're saying is that if she does not think she would get back on a higher pay grade then she should keep the 2 separate as otherwise it would reduce the final salary amount?
    • Silvertabby
    • By Silvertabby 20th Apr 17, 8:01 PM
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    Silvertabby
    • #8
    • 20th Apr 17, 8:01 PM
    • #8
    • 20th Apr 17, 8:01 PM
    So basically what you're saying is that if she does not think she would get back on a higher pay grade then she should keep the 2 separate as otherwise it would reduce the final salary amount?
    At the moment, probably. It depends on the reason for the drop in pay grade - if it wasn't at her request, and if she is SURE that she will retire before 2024 (when she will be 62) then it may be possible to calculate her combined benefits using her best year (ie, 2014).

    However, as her employers have indicated that they will split her records, that means that either the drop was at her request or the employer is working on the assumption that she will retire at State pension age and so therefore will be outside the 10 year best pay protection. See what I mean about crystal balls!
    • jem16
    • By jem16 20th Apr 17, 8:31 PM
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    jem16
    • #9
    • 20th Apr 17, 8:31 PM
    • #9
    • 20th Apr 17, 8:31 PM
    At the moment, probably. It depends on the reason for the drop in pay grade - if it wasn't at her request, and if she is SURE that she will retire before 2024 (when she will be 62) then it may be possible to calculate her combined benefits using her best year (ie, 2014).
    Originally posted by Silvertabby
    She changed jobs and went part time with the intention of winding down. The change in job resulted in the lower pay grade. I would need to find out if this was her choice or not.

    She has every intention of retiring by 60 at the latest.

    Does the LGPS use the best year in the last 10 for purpose of calculation then or is this only due to some protection? I'm used to the Teachers' scheme where it's the average of the best 3 years out of the last 10.
    Last edited by jem16; 20-04-2017 at 8:40 PM.
    • Silvertabby
    • By Silvertabby 20th Apr 17, 8:58 PM
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    Silvertabby
    Yes - it's the average of the best 3 out of the last 10. Sorry, I should have made that clear - for best protection on combined records she would have to retire at 60. However, if the drop in grade was at her own request, then she may not be afforded that protection.
    • jem16
    • By jem16 20th Apr 17, 9:01 PM
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    jem16
    However, if the drop in grade was at her own request, then she may not be afforded that protection.
    Originally posted by Silvertabby
    Just checked and it was definitely at her own request. Thanks for your help.
    • johndough
    • By johndough 20th Apr 17, 9:52 PM
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    johndough
    Hi

    I think this is a little more complex than a "Rule of 85" situation.

    It is the employers responsibility to ensure that the correct salary is given to the administrators, whether that is the 'Best of the Last 3' or the " 3 Best Averages of the Last 10 (adjusted accordingly)".

    What jars slightly is the opt out 31/08/14, which is only a few months after the CARE started. Is there not a deferred 80ths and 60ths from 31/03/14 which would have been linked to a salary?

    Hence the references above to building up the final salary after the reduction.

    What is crucial is to get, either the leaving paperwork for 31/08/14 for scrutiny, and or an Annual Benefit Statement for the deferred service to see the Salary used in the calculations.

    As indicated above the hope is that the Index Linking will give / protect the value of the deferred benefit compared to the CARE element.

    Hypothetical values.

    5 years at 1/60 compared to 5 years at 1/49 is 8.333% to 10.204% respectively. This suggests that the pension earned will be almost 22.5% more under the CARE scheme, which is some small comfort against the salary loss.
    • jem16
    • By jem16 21st Apr 17, 11:23 AM
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    jem16
    Hi

    I think this is a little more complex than a "Rule of 85" situation.

    It is the employers responsibility to ensure that the correct salary is given to the administrators, whether that is the 'Best of the Last 3' or the " 3 Best Averages of the Last 10 (adjusted accordingly)".

    What jars slightly is the opt out 31/08/14, which is only a few months after the CARE started. Is there not a deferred 80ths and 60ths from 31/03/14 which would have been linked to a salary?
    Originally posted by johndough
    Presumably it would have been CARE from 1/4/14 till 31/08/14 so 1/49ths?

    What is crucial is to get, either the leaving paperwork for 31/08/14 for scrutiny, and or an Annual Benefit Statement for the deferred service to see the Salary used in the calculations.
    From what I understand, the employer has now calculated the two options and provided figures to see whether it's best to amalgamate the two periods or not. As it appears very unlikely that the previous pay grade would be restored the figures come out best for not amalgamating the two periods.

    What was really the question was how it would affect, if at all, the Rule of 85 situation. It appears from what has been said that it will not make any difference.
    • Silvertabby
    • By Silvertabby 21st Apr 17, 12:37 PM
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    Silvertabby
    From what I understand, the employer has now calculated the two options and provided figures to see whether it's best to amalgamate the two periods or not. As it appears very unlikely that the previous pay grade would be restored the figures come out best for not amalgamating the two periods.
    Sounds reasonable. As the split is near enough the point the scheme switched from final salary to CARE only the chance of restoration to the previous pay grade (or higher) would really benefit the final calculations. The deferred benefits will now increase by CPI until they are drawn.
    • Silvertabby
    • By Silvertabby 21st Apr 17, 12:45 PM
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    Silvertabby
    What jars slightly is the opt out 31/08/14, which is only a few months after the CARE started. Is there not a deferred 80ths and 60ths from 31/03/14 which would have been linked to a salary?
    Yes - the record was deferred as at 31/08/14, with service from 01/04/2014 being accrued on a CARE basis. Only service to 31/03/2014 is calculated on a final salary/best pay basis.

    OP's example is a little unusual, but let's say someone else had their records combined thus :

    1995 to 31/03/2014 = final salary/best year if applicable

    01/04/2014 - date of leaving = CARE

    As at the date of leaving, the pension would be calculated based on the FS/CARE split - with the final salary/best pay figure for the pre 2014 service being the old rules pay figures at the date of leaving.
    Last edited by Silvertabby; 21-04-2017 at 12:47 PM.
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