Salary cut - how much effect on pension?

Rumensa

I am facing an impending salary cut of around 10%.

I am in a local govt pension scheme and contributions are about 12% of salary.

If I work another 16 years, roughly how much would this pay cut reduce my pension.

Can anyone advise?

bilbo51

This from the Greater Manchester Scheme may help:

http://www.gmpf.org.uk/members/pay_cuts/reductions_in_pay.htm

And here is their calculator:

http://www.gmpf.org.uk/calculators/whole_time_calc.htm

Andy_L

Your pension is based on your "final salary" IIRC in the Local Gov that's the best 12 months in the last 3 years. Depending on what happens to your salary between now & retiring it could have no effect or it could reduce your pension by 10%

jem16

Rumensa wrote: »

I am facing an impending salary cut of around 10%.

I am in a local govt pension scheme and contributions are about 12% of salary.

If I work another 16 years, roughly how much would this pay cut reduce my pension.

Can anyone advise?

Difficult to tell. Unfortunately from 2014 the LGPS will change to a career average scheme and your accrued final salary benefits look likely to be based on the lower salary.

hyubh

Rumensa wrote: »

I am facing an impending salary cut of around 10%.

Presumably this is a 10% reduction in your rate of pay, rather than a reduction in actual pay caused by a reduction in working hours? LGPS benefits are based on whole-time equivalent, not actual salaries, so it matters. If the former, ask your employer whether they will allow you to defer your benefits as they stand the day before the cut comes in, and then start afresh with a new pension record after that.

If they will, your employer's payroll will need to complete a suitable form for the fund administrator, so make sure you badger them to do it if matters come to that - the administrator can't do anything without employer authorisation.

I am in a local govt pension scheme and contributions are about 12% of salary.

'About'? Presumably you're in Scotland, since the English and Welsh bands don't go as high as 12% (yet)? Alternatively, maybe you mean you pay additional contributions of some sort...?

If I work another 16 years, roughly how much would this pay cut reduce my pension.

Given the scheme will be moving to a career average basis from April 2014, more than it would have done. It would probably still be worth deferring the membership up until the pay cut though, given the final salary used to calculate pre-2014 benefits will be your actual final salary if you didn't do anything, and the deferred pension's value would increase with CPI each year.