Career Average Pension -
Membership before 1st April 2014
It is important to note that all pensions built up before 1 April 2014 are
protected. As a current contributing member to the Scheme you will get a
pension (and automatic lump sum if any) based on your final pay at eventual
retirement, calculated under the current scheme definition of pensionable pay
(as detailed on page 7). This means that any future pay increases you receive
will be included in the final pay used to work out these benefits. It’s also worth
mentioning that you will maintain the best of the last three years check. Your
final pay is generally your last 12 months of membership, however we will use
one of your previous two years if that is higher when calculating your pension
built up before 1st April 2014.
Protection
for all
st
The other highlight to protection on pension built up before 1st April 2014 is you
will maintain the current definition of Normal Pension Age, which for the majority
of our members is age 65.
The only way the above protections can be lost is if you have a break of more
than five years out of active membership of any public sector pension scheme
and then upon recommencing, amalgamate the two sets of membership.
The following example shows the calculation of a member’s benefits with
membership in both the current and new scheme and how the member
maintains the final salary link and protected Normal Pension Age.
Susan’s details
Date of Birth Date of Leaving Membership up to Membership from
31st March 2014
1st April 2014
1st April 1955
31st March 2020 19 years 100 days
(65th birthday)
6 years
Pay at
31st March 2015
(2014 scheme
definition)
Final Pay at
Date of Leaving
(2008 scheme
definition)
Age 65
Protected Normal
Pension Age
(2008 scheme
definition)
New Normal Pension
Age (2014 scheme
definition) linked to
state pension age
£25,200
£28,500
Age 65
Age 66
Susan decides to draw her pension at age 65. Her final salary scheme
membership will be payable unreduced as it is being paid at her protected
Normal Pension Age for that membership.
Her career average pension (from April 2014 to date of leaving) will be
reduced as it is being paid one year earlier than her new Normal Pension Age
in the career average scheme, which is linked to her State Pension Age.
Final Salary Benefits Membership up to March 2008 = 13 years 100 days
Pension - 13 years 100 days x £28,500 / 80 = £4,728.85
Automatic Lump Sum - 3 x £4,728.85 = £14,186.56
Final Salary Benefits Membership from April 2008 to March 2014 = 6 years
Pension - 6 years x £28,500 / 60 = £2,850.00
Automatic Lump Sum - = Nil
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What is the rule of 85?
Membership from April 2014 to date of leaving
Scheme Opening
Year
Balance
Pension Total Cost of
Updated
built up
Account
living Total
in year
31 March
Account
1
£0.00 £25,200/ 49
£514.29
£10.28
= £514.29 (2%)
£524.57
2
£524.57 £25,700/ 49
£1,049.06
£10.49
= £524.49 (1%)
£1,059.55
3
£1,059.55 £26,000/ 49
£1,590.16
£7.95
= 530.61 (0.5%)
£1,598.11
4
£1,598.11 £26,500/ 49
£2,138.93
£42.78
= £540.82 (2%)
£2,181.71
5
£2,181.71 £27,000/ 49
£2,732.73
£81.98
= £551.02 (3%)
£2,814.71
6
£2,814.71 £29,000/ 49
£3,406.55
£68.13
= £591.84 (2%)
£3,474.68
The total pension in the career average scheme at age 65 is reduced as
it is being paid a year earlier than Susan’s Normal Pension Age for her
career average pension (age 66). The reduction for a female drawing
her pension one year early is currently 5%. Please refer to reduction
factors on page 7.
Total Pension Benefits
Pension Pension Pension Total
built up to
built up from
built up from
31st March
1st April 2008 to
1st April 2014
2008 31st March 2014
to Age 65
Pension £4,728.85
£2,850.00
Lump Sum
£14,186.56
(Automatic)
£3,474.68 - 5%=
£3,300.94
No Automatic
No Automatic
Lump Sum*
Lump Sum*
£10,879.79
£14,186.56
Please note you cannot take your benefits built up to April 2014
separately from the benefits you build up from April 2014. All of
your pension would have to be drawn at the same time.
* However you can give up pension in exchange for a tax free lump sum at retirement
Further protection for members with rule of 85
If you have the rule of 85 protections (under the old scheme rules),
these will continue to apply in the new scheme except if you choose to
take your pension on or after age 55 but before age 60. The reason the
rule of 85 protections do not apply if you voluntarily choose to take your
pension before age 60 is because this is a new option in the Scheme
from April 2014. Having said that, your employer could decide to let the
protections apply, and this is what we refer to as an employer discretion.
Each employer will be required to formulate and publish their own policy
regarding this issue.
To have the rule of 85 protection you must have been a member of the
Scheme on 30th September 2006.
The rule of 85 is satisfied if
your age at the date you draw
your pension plus your scheme
membership (each in whole
years) adds up to 85 years or
more.
The rule of 85 protects some
or all of your benefits from the
normal early payment reduction.
So if you have the rule of 85
protections this will continue
to apply in the new scheme,
unless you choose to voluntarily
retire between age 55 and 60 as
mentioned opposite.
The Best of Both - Underpin
Further protections are in place
if you are close to retirement.
If you were:
• paying into the Scheme on
31st March 2012, and
• within 10 years of normal
pension age on 1st April 2012,
and
• you haven’t had a disqualifying
break in service of more than 5
years (after 31/03/2012), and
• you’ve not drawn any benefits
in the 2014 LGPS before
normal pension age, and
• you leave with an immediate
entitlement to benefits;
you will have your benefits
calculated under the new rules,
unless the current rules give you
an even better pension.
The Annual Pension Forecast
we issue next year will include
the value of any final salary
benefits you have built up
before April 2014. In addition
you will receive details of the
pension you build up in the
new career average scheme.
It’s important that you check
your Annual Pension Forecast
each year.
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