Reducing hours and LGPS implications

JohnnyJet

I am considering reducing my hours at work either by asking for an extra day off a week or by having 2/3 weeks extra holiday a year. I don't want to ask them until I know that i can afford to do this.

Does anyone know how my LGPS will be affected by this and how much pay I could expect to lose? Also for my salary. Are there any formulas or websites that would help?

molerat

Going to a 4 day week will cost you 1/5th of your gross pay. Your pensionable pay will remain the same but you will only accrue 4/5ths of a year service per calendar year worked. I doubt they would go for the extra holiday as that would be difficult to administer.

Andy_L

If you drop your hours your accrued pension will be unaffected as it is based on the full time salary. However any future service will accrue years of service at a pro-rata rate eg a 4 day week would get you 4/5ths of a years service

JohnnyJet

Okay thanks.

I know of several people I work with that have chosen to work a 3 day week several years before retirement.

My confusion is based around it being called a final salary pension, if I chose to reduce my days then my pay would reduce, hence my final salary would be less and wouldn't that effect my pension?

So from what I understand this is not the case so if I chose to reduce my hours say 2 years before retirement then it would only be my future payments into the plan that would be affected and I would still get my previous contributions paid as my previous higher salary?

greenglide

"Final salary" isn't it's official title because the pension amount depends on both the salary and the number of years service.

Anyone who is part time has a pensionable salary set at the full time equivalent but only accumulates pensionable salary at the proportion of the full time equivalent.

If you work half a week then you get half of a year service added but the pensionable salary remains the same. You would lose an amount depending on the number of hours worked. The impact on pension as a percentage would depend on the number of years service you already have - if you already have 38 years service and work 2 years at half hours you would end up with 39 years service rather than 40 - a reduction of 2.5%

JohnnyJet

Okay I understand now, thanks.

I have two other small pension funds, one with another company and one where I opted out of SERPS, can I move these into my LGPS? The amount is less than £10,000 I think. Also if this is possible, does it matter how soon I do this?

hyubh

JohnnyJet wrote: »

I am considering reducing my hours at work

Are you in England and Wales and therefore in the new CARE scheme, or in NI or Scotland and therefore still in the 1/60 final salary scheme (until April 2015)?

JohnnyJet

hyubh wrote: »

Are you in England and Wales and therefore in the new CARE scheme, or in NI or Scotland and therefore still in the 1/60 final salary scheme (until April 2015)?

I'm in England.

hyubh

JohnnyJet wrote: »

I'm in England.

In which case, so long as your rate of pay doesn't go down, what greenglide has explained goes for your final salary membership (pre-April 2014 service still produces benefits based on your whole time equivalent pay on leaving rather than as at 31 March 2014); as for your CARE membership there's no particular implication either way. However, you may benefit from a lower employee contribution rate given the CARE scheme bands employee rates by actual not whole time equivalent pay.

BobQ

hyubh wrote: »

In which case, so long as your rate of pay doesn't go down, what greenglide has explained goes for your final salary membership (pre-April 2014 service still produces benefits based on your whole time equivalent pay on leaving rather than as at 31 March 2014);

Agreed

as for your CARE membership there's no particular implication either way. However, you may benefit from a lower employee contribution rate given the CARE scheme bands employee rates by actual not whole time equivalent pay.

Depends what you mean by no particular implication! Under LGPS 2014, the pension for each year will be 1/49th of pensionable pay. So if you earn say 80% of the Full Time Equivalent (FTE) Salary you will pay only 80% of the FTE salary each year into your pension and so receive less pension in respect of your part time years when you draw it.

hyubh

Depends what you mean by no particular implication! Under LGPS 2014, the pension for each year will be 1/49th of pensionable pay. So if you earn say 80% of the Full Time Equivalent (FTE) Salary you will pay only 80% of the FTE salary each year into your pension and so receive less pension in respect of your part time years when you draw it.

Er, of course. My point was that the rate of pay is no longer a direct factor.