LGPS Rule of 85 question

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jem16
jem16 Posts: 19,398 Forumite
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in Pensions, annuities & retirement planning
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)?
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  • Silvertabby
    Silvertabby Posts: 9,023 Forumite
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    edited 20 April 2017 at 12:30PM
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    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).
  • jem16
    jem16 Posts: 19,398 Forumite
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    edited 20 April 2017 at 12:39PM
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    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.
  • Silvertabby
    Silvertabby Posts: 9,023 Forumite
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    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
    jem16 Posts: 19,398 Forumite
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    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
    Silvertabby Posts: 9,023 Forumite
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    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
    jem16 Posts: 19,398 Forumite
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    Silvertabby wrote: »
    As far as R85 is concerned, there wouldn't be any difference.

    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
    Silvertabby Posts: 9,023 Forumite
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    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
    jem16 Posts: 19,398 Forumite
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    edited 20 April 2017 at 8:40PM
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    Silvertabby wrote: »
    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).

    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.
  • Silvertabby
    Silvertabby Posts: 9,023 Forumite
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    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
    jem16 Posts: 19,398 Forumite
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    Silvertabby wrote: »
    However, if the drop in grade was at her own request, then she may not be afforded that protection.

    Just checked and it was definitely at her own request. Thanks for your help.
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