Part time and Macleod

Redsox64

I am thinking of retiring at 60 (in 2 years time), or shortly thereafter. I have been a Member of LGPS since 1983. I think it is likely that I will get 2 estimates when I choose to go, one setting out if I’d have been better off had I not been moved to CARE? For most I guess the answer to that will be no given the higher 1/49 rate. However I have worked part time since 2000. Pre 2014 would have been linked to final (full time) salary whereas CARE is based on part time salary. 

I could really do with knowing now what the relative benefits are likely to be as this may affect whether I can afford to go at 60, which in turn may affect my relocation plans. I have R85 protection for pre 2008 benefits. 

I’m not sure if I’ve got this totally right and would appreciate if anyone can offer any further knowledge. Many thanks. 

Nebulous2

If you are working part-time (P/T) the final salary used is the full-time salary for your post, not your P/T salary.  Working part-time under the old scheme dealt with P/T by giving you less than a year for each year you worked. So working half-time you needed to work 2 years to get a year of pension. 

Care gives a pension based on a percentage of your salary, as you have identified above. The effect is the same. Getting half the salary will accrue half the pension both ways, it is just expressed differently. 

Your annual statement will give you your figures pre-remedy and that will be a bottom line, you shouldn't fall below that. The remedy offer may or may not be higher and you can choose it if it is higher. 

Redsox64

Thanks @Nebulous2. So if I understand correctly from 2000 up until 2014 my membership is reduced in years based on % hours worked (around 60% in my case) but based on full time salary. Whereas from 2014 membership years are not reduced but pension benefits calculated on p/t salary?  Have I got this right? So under Macleod it would be the difference between the 2 calculations?  Thanks

Nebulous2

Redsox64 said:

Thanks @Nebulous2. So if I understand correctly from 2000 up until 2014 my membership is reduced in years based on % hours worked (around 60% in my case) but based on full time salary. Whereas from 2014 membership years are not reduced but pension benefits calculated on p/t salary?  Have I got this right? So under Macleod it would be the difference between the 2 calculations?  Thanks

Yes - I think you put it more succinctly than I did! 

You will effectively have two pensions, both paid at the same time. The old final salary one will be paid until you move to the care scheme and the care scheme will be paid from then until you retire. 

What McLeod will do is alter when the changeover from one scheme to the other happens. Under the changes implemented in 2014 you would have moved from final salary to care in 2014.  McLeod will give you the opportunity to stay on final salary until March 2022 instead and then move to care. You get the opportunity to choose whichever one is the most favourable for you. 

I'm not an expert, but there are some on this forum, I'm sure they'll be along to correct me if I'm wrong! 

hyubh

Redsox64 said:

Thanks @Nebulous2. So if I understand correctly from 2000 up until 2014 my membership is reduced in years based on % hours worked (around 60% in my case) but based on full time salary. Whereas from 2014 membership years are not reduced but pension benefits calculated on p/t salary?  Have I got this right?

The number of membership years isn't very material in the CARE scheme. For your pre-2008 membership, the calculation is this:

• Final pensionable pay [so, whole time equivalent if P/T] x reckonable years [i.e., calendar years scaled down for any periods of P/T working] x 1/80; standard lump sum of the pension x 3

For your 2008-14 membership (and if it worked out higher than the next calculation, 2014-22 membership too):

• Final pensionable pay [so, whole time equivalent if P/T] x reckonable years [i.e., calendar years scaled down for any periods of P/T working] x 1/60; no standard lump sum

For your 2014-22 membership, if it works out higher than the previous calculation, plus any membership post-22:

• For each scheme year (1 April-31 March), take your actual pensionable pay and x 1/49; the total to date is then 'revalued' by CPI each year too, to maintain its value in real terms.

Obviously, 1/49 in itself is much better than 1/60. However the pension accrued for each year, in real terms, remains stable over time. With final salary accrual, in contrast, it matters how your whole time equivalent pensionable pay fares over time. Imagine you won a big promotion in 2021. Under final salary accrual, your membership years to date (1983-2021) now suddenly get a big boost in value, as they give you 1/80 (1983-2008) or 1/60 (2008+) the higher rate of pay. Under CARE accrual, however, they don't.

In addition, the CARE scheme has a higher normal pension age, although given the 2014-22 period is past the point you benefit from 85 year rule protections, how much this affects matters isn't clear cut:

• Draw your benefits at 60, and choosing final salary accrual for 2014-22 would mean the pension for that period having an 'actuarial reduction' for being drawn 5 years early; as CARE benefits, it would have a reduction for being drawn 7 years early.
• Decide to stick things out to 67 though, and your CARE pension would now not be reduced, and your final salary pension would be subject to an 'actuarial increase' for being 2 years late.

Given your total pension involves a large proportion with 85 year rule protections though, I think you are right to be looking at age 60 - there is no obvious benefit to leaving 85 year rule protected pension beyond 60, as it would only get an actuarial increase if you drew it after age 65. So in other words, if you leave your pension beyond age 60, you effectively just give up the benefit of having rule of 85 protections in the first place.

One other thing - the definition of 'pensionable pay' is wider under the CARE scheme, which may affect you. Under the final salary scheme, non-contractual overtime was not pensionable, whereas under the CARE scheme it is. So if for sake of argument you volunteered for 5 hours of overtime each week, under the final salary scheme this extra work would count neither as extra hours (to make your 'reckonable service' closer to your calendar service) nor as extra pensionable pay, if it came to be in your final year. Whereas under the CARE scheme, it all counts as pensionable pay for the scheme year, i.e. the 1/49 pension accrual kicks in for the additional paid hours.

So under Macleod it would be the difference between the 2 calculations?

Essentially yes, for the period 2014-22. The LGPS is a bit different to the other McCloud-affected schemes in that there isn't a choice between final salary and CARE accrual for 2014-22. Instead, there's an 'underpin' - a revised version of the original underpin for originally protected members. This means you just get the higher of the two potential pensions for 2014-22, after any adjustments for actuarial decreases and increases on different tranches of pension.

Redsox64

Thanks @hyubh. There’s lots of detail here which I will have to read a few times to get my head around it all. 

horsewithnoname

https://www.gov.uk/government/news/retirement-calculator-202223

There are calculators available, depends which dept you are in, but a search engine will help you find the appropriate one if available. 

hyubh

horsewithnoname said:

https://www.gov.uk/government/news/retirement-calculator-202223

There are calculators available, depends which dept you are in, but a search engine will help you find the appropriate one if available. 

That's not for LGPS.

Redsox64

I did just check and couldn’t see that it applied to LGPS so thanks for confirming. It would be helpful if there were one as working out the calculations is complex and especially for someone like me who is  not great with figures!!