LGPS question

Gsea

Hi all,

Family member had accrued several years final salary benefits pre 2014 with LGPS, before making a career move outside of local government. Now they have returned to local government, they have to decide whether or not to combine their old FS benefits into the new scheme. I notice the default position is to transfer the FS benefits to the new scheme unless the scheme is told otherwise.

The new starting salary is greater than the leaving salary, which would immediately give a 20% increase in the value of the FS pension.

Together with the benefits if made redundant aged 55 or over, it appears to me that it’s a no brainer to transfer the FS benefits into the current scheme (combined benefits). However, what would happen to the FS element, if for some reason the said person reduced their working hours later in life, and thus having a lower salary?

Am I missing anything else?

TIA

Andy_L

FS calculation is based on full time equivalent (FTE) salary. The effect of going part time is made by a years PT employment only counting as a fraction of a years service - which isn't going to impact them as they aren't accruing any more FS membership.

"which would immediately give a 20% increase in the value of the FS pension."
If they don't combine them it will increase with inflation each year (so ~10% this year), if they do combine they get that 20% but then it will only increase with pay rises* - which do you think is likely to be the better deal

*The LGPS might apply inflation increases to past salary when working out what years to use to calculate the salary used for pension. Or it might not (eg NHS does, Civil Service doesn't)

Gsea

Thanks Andy,

I might have known it wasn’t going to be that simple :-).

Am I correct in thinking that the combined benefits are adjusted in line with CPI, and this would be additional to any pay increases?

TIA

Gsea

Andy_L said:

FS calculation is based on full time equivalent (FTE) salary. The effect of going part time is made by a years PT employment only counting as a fraction of a years service - which isn't going to impact them as they aren't accruing any more FS membership.

Does this mean the FS would be based on full time equivalent earnings, even though they are working part time?

TIA

daveyjp

The FS LGPS is no more, it has been a career average scheme since 2014.

As a part time worker they will now contribute and accrue a career average pension based on their hours.  If 50% part time, they will receive 50% pension.

Their pre 2008 FS pension is deferred so increases through annual inflation adjustment.

They should get a statement off their LGPS provider to see what current values are and decide if combining to career average is worth it based on their part time status and whether they wish to give up a lump sum.

Andy_L

Gsea said:

Andy_L said:

FS calculation is based on full time equivalent (FTE) salary. The effect of going part time is made by a years PT employment only counting as a fraction of a years service - which isn't going to impact them as they aren't accruing any more FS membership.

Does this mean the FS would be based on full time equivalent earnings, even though they are working part time?

TIA

Yes it does

Gsea

Thanks Andy.

hyubh

Gsea said:

Family member had accrued several years final salary benefits pre 2014 with LGPS, before making a career move outside of local government. Now they have returned to local government, they have to decide whether or not to combine their old FS benefits into the new scheme. I notice the default position is to transfer the FS benefits to the new scheme unless the scheme is told otherwise.

It's only the default position if the leaving date for the previous membership was under the CARE scheme. If she left before April 2014, then the default is separate benefits with the option to combine within 12 months of rejoining (potentially longer if the employer's discretionary policy allows for that, but most don't).

However... if the gap is more than 5 years between leaving and rejoining, then aggregating means a CETV to purchase additional pension that revalues by CPI, rather than taking the old service and putting it against the new job's final pay. Doesn't make the aggregation option bad, but it does make it different.

what would happen to the FS element, if for some reason the said person reduced their working hours later in life, and thus having a lower salary?

Assuming there isn't a 'disqualifying break' of more than 5 years, doesn't matter in itself, since final salary benefits are based  on whole-time equivalent pay with any part time periods counting pro-rata. Otherwise, someone 50% part time for 20 years would have a trivial way to double the value of that service 12 months before retirement...

Lemon_dr1zzle

daveyjp said:

The FS LGPS is no more, it has been a career average scheme since 2014.

As a part time worker they will now contribute and accrue a career average pension based on their hours.  If 50% part time, they will receive 50% pension.

Their pre 2008 FS pension is deferred so increases through annual inflation adjustment.

They should get a statement off their LGPS provider to see what current values are and decide if combining to career average is worth it based on their part time status and whether they wish to give up a lump sum.

I would just like to clarify some points on this post. 

A part time worker does not receive a 50% pension. They will receive a 100% pension based on their actual pensionable earnings, not hours. Yes their pension will be half of a full time person on the same whole time equivalent but it is not a 50% pension. The only way to have a 50% pension is to move into the 50/50 scheme. 

Is the old pension totally pre 14? I.e they left before 31.03.14. If so, if they aggregate their records they will no longer have any final salary benefits. They will be converted to a transfer value and used to purchase additional CARE pension.  

Gsea

hyubh said:

Assuming there isn't a 'disqualifying break' of more than 5 years, doesn't matter in itself, since final salary benefits are based  on whole-time equivalent pay with any part time periods counting pro-rata. Otherwise, someone 50% part time for 20 years would have a trivial way to double the value of that service 12 months before retirement...

Hi Hyubh,

After reading this I had check it out. Family member had a break of just under 6 years, however her paperwork does confirm both the deferred benefit and combined benefit. It also confirms that membership built up before 2014 will continue as final salary membership.

Lemon_dr1zzle said:

Is the old pension totally pre 14? I.e they left before 31.03.14. If so, if they aggregate their records they will no longer have any final salary benefits. They will be converted to a transfer value and used to purchase additional CARE pension.  

Hi Lemon_drizzle,

The old pension scheme was from 2008-2016.

Regards