LGPS - Protected Pension Age?

BillyHorner

Hi there

I've noticed that there are a lot of clued up people on here, so I was wondering if someone might be able to answer a question I have about the Local Government Pension Scheme?

I'm a 50 year old Local Government Officer, who joined the LGPS in 1994. My employer (like most councils) is struggling financially at the moment and there are likely to be a round of redundancies announced in the near future. I don't yet know if I'll be selected for redundancy, but I'm obviously worried about it.

I'm aware that, generally, you have to be aged 55 years or older to receive a pension through the LGPS if you're made redundant. However, I've been reading about something called Protected Pension Age, which was brought in when they moved the minimum pension age from 50 to 55, and wondered whether that applied to the LGPS and might therefore apply to me?

Under the old scheme (before they changed the pension age) if you were aged 50+ and were made redundant, you were entitled to receive a pension (don't know if it was reduced or not). With the new scheme, though, if you are aged 55+ and made redundant, the scheme rules say you will receive an immediate unreduced pension.

From what I have been reading, if you were an active member of an occupational pension scheme prior to them changing the minimum pension age and had such a right to a pension upon redundancy at aged 50, then you would have a Protected Pension Age of 50 should such redundancy occur. That would seem to apply to the LGPS and, therefore, to me individually. However, I've never heard anyone at work talk about any such right and I can't find any reference to it in any of the LGPS literature.

Does anyone know the answer to this question? Obviously, I'm still hoping to avoid redundancy and keep working for a good few years yet, but it would give me some comfort at least, if I knew that I would have some income to fall back on, should the worst happen.

Silvertabby

Sorry.  Very few schemes still offer a protected retirement age of 50, and the LGPS isn't one of them.

AlanP_2

I too work for a LA, and like all of them money is tighter than ever after what has been spent over the last few months on the C19 response but I don't realistically see there being a big cut back in public services generally or local gov specifically for the next couple of years whilst this all unwinmds.

There will be more to do than ever supporting the vaccination rollout, community support, public helath & wellbeing, economic support for local businesses etc. and central gov will stump up whatever is needed to keep the wheels oiled for now.

NOTE - Yes there will no doubt be some redundancies as restructures etc. take place but nothing like to the extent of 2010 onwards. 

hyubh

BillyHorner said:

I'm a 50 year old Local Government Officer, who joined the LGPS in 1994.

Are you a member, and have always been a member, of a Scottish LGPS fund, and if so, were you classed as a 'manual worker' back in the day...?

(There are a small subset of Scottish LGPS members who happened to fulfil the statutory criteria for a protected early retirement age when covering legislation moved it from 50 to 55 for pensions in general. Whether fulfilling that criteria that implies scheme-specific rules about unreduced pensions from 50 apply too is another matter, though if you aren't a Scottish LGPS member, that's academic.)

BillyHorner

Many thanks for the replies. I really do appreciate it.

I've never been a member of the Scottish LGPS unfortunately.

The reason I asked the question is that I came across guidance on Protected Pension Age on the HMRC Pensions Tax Manual website. I'm not allowed to post the link yet, but the relevant bits are as follows (apologies for the length):

Eligibility requirements

These conditions apply to an individual who on 5 April 2006 was a member of any one of the following pension vehicles:

• Public service scheme - a relevant statutory scheme, as defined in section 611A ICTA 1988, or a scheme that on 5 April 2006 was treated as if it were such a relevant statutory scheme

For a member to have a protected pension age under one of the pension vehicles listed above, all the following conditions must be met:

• On 5 April 2006 the member had the right to take a pension and/or lump sum before they were 55,
• That right was unqualified - see What is meant by an unqualified right to take benefits below,
• On 10 December 2003 the scheme rules or deferred annuity contract terms included provision to pay benefits before age 55, and
• The member had either:

1. an unqualified right under that scheme or contract on 10 December 2003, or
2. acquired the right in accordance with that scheme’s provisions as they were on 10 December 2003 upon joining the scheme after that date.

Where these conditions are met, the age at which the member has the right to take a pension on 5 April 2006 will become their protected pension age under the scheme.

What is meant by an unqualified right to take benefits

To have a protected pension age the member must have had the right to take benefits before normal minimum pension age.  That is not the ability to take benefits, but an unqualified right.

An individual has an unqualified right to take benefits if they do not need the consent of anybody before they can take their benefits. If the scheme documentation states that the consent of the trustees or employer is required to take benefits the member does not have an unqualified right to take benefits. (It does not matter that the trustees have always operated their discretion to allow the payment of early benefits, the right is still not an unqualified right.)

Some rules give members an unqualified right to take benefits but only when a certain contingency occurs. It is only when the contingency occurs that the rules of the registered pension scheme give a member the unqualified right to take benefits before age 55 and that they will have a protected pension age. So unless and until the relevant contingency actually occurs in respect of them, the members do not have a protected pension age.

For example, on 10 December 2003 a scheme may give its members an unqualified right to take pension benefits before 55, but only if they are made redundant. If any members are made redundant after 5 April 2010, are aged over 50 but under 55 and exercise their right to take pension benefits, they will have a protected pension age and will not be liable to a tax charge.

Until 2008, the LGPS scheme regulations stated that:

26.-(1) If-

(a) a member who is aged 50 or more retires from a local government employment; and

(b) his employing authority certify the reason for his retirement was his redundancy,

he is entitled to a pension and retirement grant.

(2) The pension and grant are payable immediately.

(3) But a person who is notified under regulation 15 of the Local Government (Compensation for Redundancy) Regulations 1994 about compensation due because regulation 9 of those Regulations applies to his retirement may waive his right to immediate payment by notice in writing to his employing authority.

(4) In paragraph (1) "redundancy" includes retirement in the interests of efficiency, or because the member held a joint appointment which has been ended because the other holder has left it.

So, my interpretation of all of the above was that the LGPS was a recognised public service scheme. On the relevant dates (10 December 2003 and 6 April 2006), the scheme regulations gave active members a right to pension and grant, payable immediately , upon redundancy at age 50 or above. As such, active members on 6 April 2006 would therefore have a contingent Protected Pension Age of 50 years should such redundancy occur.

I accept, of course, that I'm obviously incorrect in my interpretation. I just can't work out how I've misinterpreted it!

OldBeanz

Was a Civil Servant for many a year and until 2010 and if you made 53.5yo (ish memory fading) then subsequently made redundant you would be given your pension and paid the equivalent of having retired at 60. One of the first things Cameron stopped.

Silvertabby

The cruncher is the bit about having an unqualified right to take benefits before age 55.  

This wasn't/isn't the case with the LGPS, as the minimum payment age (without employer consent) was 60 (before it was reduced to 55).

BillyHorner

Silvertabby said:

The cruncher is the bit about having an unqualified right to take benefits before age 55.  

This wasn't/isn't the case with the LGPS, as the minimum payment age (without employer consent) was 60 (before it was reduced to 55).

Thanks Silvertabby. Would that not be covered by an entirely different scheme regulation from the redundancy situation though?

Again, the pre-2008 regulations stated this about electing to receive pension before the age of 60:

Other early leavers: deferred retirement benefits and elections for early payment

31.-(1) If a member leaves a local government employment (or is treated for these regulations as if he had done so) before he is entitled to the immediate payment of retirement benefits (apart from this regulation), once he is aged 50 or more he may elect to receive payment of them immediately.

(2) An election made by a member aged less than 60 is ineffective without the consent of his employing authority or former employing authority

So it is clear that, in those circumstances (i.e. non-redundancy) there was no unqualified right to pension from aged 50 as it was dependent on the consent of the the employer. Therefore, I would agree that there is no absolute protected pension age for LGPS members that would enable them to simply elect to receive pension from aged 50+.

But there was an unqualified right (i.e. without the consent of the employer) to immediate pension from the age of 50+ in the event of redundancy. That was enshrined in a different regulation (Reg. 26) which I reproduced in my previous post. The HMRC manual would appear to be saying that, where members had an unqualified right to pension but only when a certain contingency occurs (e.g. redundancy), those members would have a protected pension age should that contingency occur (but not otherwise).

Again, I really do appreciate the replies and I also acccept that I must be wrong. I'm just really struggling to understand what I'm misinterpreting that's making me wrong.

Silvertabby

Yes, but only until the 2008 regs.

The minimum age increased from 50 to 55 in one fell swoop on 1 April 2010.  I don't know about other LGPSs, but the one I worked for certainly had a flurry of redundancies wef 31 March 2010, many of whom were over 50 but under 55.
  I felt so sorry for them, and there were certainly complaints - but no payments.

BillyHorner

Silvertabby said:

Yes, but only until the 2008 regs.

The minimum age increased from 50 to 55 in one fell swoop on 1 April 2010.  I don't know about other LGPSs, but the one I worked for certainly had a flurry of redundancies wef 31 March 2010, many of whom were over 50 but under 55.
  I felt so sorry for them, and there were certainly complaints - but no payments.

Ah, I think I get it now. So, because they changed the scheme rules in 2008, in advance of the legal changes to minimum pension age from 50 to 55 in April 2010, the protections don't apply to the LGPS?

Silvertabby

BillyHorner said:

Silvertabby said:

Yes, but only until the 2008 regs.

The minimum age increased from 50 to 55 in one fell swoop on 1 April 2010.  I don't know about other LGPSs, but the one I worked for certainly had a flurry of redundancies wef 31 March 2010, many of whom were over 50 but under 55.
  I felt so sorry for them, and there were certainly complaints - but no payments.

Ah, I think I get it now. So, because they changed the scheme rules in 2008, in advance of the legal changes to minimum pension age from 50 to 55 in April 2010, the protections don't apply to the LGPS?

Bingo, unfortunately.

Other public sector pension schemes have 
different rules, so some do still have age 50  (or earlier) protected rights  - but not the LGPS.

If it's any consolation, if age 50 did still apply then a cash-strapped employer would be unlikely to pick you as the strain costs involved would be humongous.