The Local Government Pension Scheme (LGPS) is a statutory, funded pension scheme and you can look forward to enjoying a guaranteed package of benefits when you retire. It is very secure because its benefits are defined and set out in law.
There are rules which can project your pension from reductions if you retire early.
The Rule of 85
If you were a member of the LGPS between 1 April 1998 and 30 September 2006, some or all of your benefits paid early could be protected from the reduction under what is called the 85 year rule.
The 85 year rule is satisfied if your age at the date you draw your benefits and your scheme membership (each in whole years) add up to 85 or more.
If you work part-time, your membership counts towards the rule of 85 at its full calendar length.
Not all membership may count towards working out whether you meet the 85 year rule.
If you have 85 year rule protection this continues to apply from 1 April 2014. The only occasion where this protection does not automatically apply is if you choose to voluntarily draw your pension on or after age 55 and before age 60.
Working out how you are affected by the 85 year rule can be quite complex, but this should help you work out your general position.
- If you would not satisfy the 85 year rule by the time you are 65, then all your benefits are reduced if you choose to draw your pension before your Normal Pension Age.
- If you will be age 60 or over by 31 March 2016 and choose to draw your pension before your Normal Pension Age, then, provided you satisfy the 85 year rule when you start to draw your pension, the benefits you build up to 31 March 2016 will not be reduced.
- If you will be under age 60 by 31 March 2016 and choose to draw your pension before your protected Normal Pension Age, then, provided you satisfy the 85 year rule when you start to draw your pension, the benefits you’ve built up to 31 March 2008 will not be reduced. Also, if you will be aged 60 between 1 April 2016 and 31 March 2020 and meet the 85 year rule by 31 March 2020, some or all of the benefits you build up between 1 April 2008 and 31 March 2020 will not have a full reduction.
If you take flexible retirement, any 85 year rule protection will apply to the benefits you’ve built up to the date of flexible retirement but will not apply to benefits you build up after the date of flexible retirement.
If you choose to voluntarily draw your pension on or after age 55 and before age 60 and you have rule of 85 protections, these will not automatically apply. Your employer can choose to allow the rule of 85 to apply. This is a discretion and you can ask your employer what their policy is on this matter.
If you choose to voluntarily draw your pension on or after age 55 and before age 60 and your employer does not choose to allow the rule of 85 to apply, your benefits are reduced.
Please note that the rules governing whether you have protection under the 85 year rule from a reduction to your benefits if you choose to draw them before 65, and the level of that protection, are quite complex.
If you are thinking of voluntarily retiring or asking for flexible retirement before your Normal Pension Age, you should contact us or a quotation of the benefits payable. If you are thinking of asking for flexible retirement you should firstly contact your employer to check what their policy is for this type of retirement.
Your employer can agree not to make any reduction. You can ask them what their policy on this is.
The Underpin
When the scheme changed on 1 April 2014 an additional protection was put in place if you were within 10 years of your normal retirement age (in most cases age 65) on 1 April 2012. This is to ensure that you will get a pension at least equal to that which you would have received in the scheme had it not changed on 1 April 2014. This protection is known as the underpin.
The underpin applies to you if you:
- were an active member on 31 March 2012
- were within 10 years of your protected Normal Pension Age on 1 April 2012 (usually 65)
- haven't had a continuous break in active membership of a public service pension scheme of more than 5 years (after 31 March 2012)
- you haven't taken any benefits in the career average LGPS scheme before the date the underpin calculation is performed - this is the earlier of the date you leave the scheme or your protected Normal Pension Age.
The underpin can also apply if you were an active member of another public service pension scheme on 31 March 2012 and you then join the LGPS and transfer your pension benefits from the other public service pension scheme into the career average LGPS scheme and all or part of that transfer buys final salary benefits in the LGPS. The underpin will apply in these circumstances if:
- there is a break of less than 5 years between you leaving the public service pension scheme from which the transfer is received and joining the LGPS
- you were within 10 years of age 65 on 1 April 2012
- you haven't had a continuous break in active membership of a public service pension scheme of more than 5 years (after 31 March 2012)
- you haven't taken any benefits in the career average LGPS scheme before the date the underpin calculation is performed - this is the earlier of the date you leave the scheme or age 65
The underpin will not apply if any of the circumstances below apply:
- you leave without an immediate entitlement to benefits
- if you elect to opt out of the scheme before your protected Normal Pension Age (age 65 for almost all)
- if you leave the scheme with a deferred benefit and, at the date of leaving, you would have required your employer's consent to take payment of those benefits under the pre 1 April 2014 scheme
- if, other than flexible retirement, you voluntarily draw benefits from an age where you would have required your employer's consent to do so under the pre 1 April 2014 scheme
From 14 May 2018, you normally need your employer's consent to take payment of your benefits in the pre 1 April 2014 scheme before age 55. Before 14 May 2018, you needed your employer's consent to take payment of your benefits in the pre 1 April 2014 scheme before age 60.
If you are covered by the underpin a calculation will be performed at the date you cease to contribute to the Scheme, or at your protected Normal Pension Age if earlier, to check that the pension you have built up (or, if you have been in the 50/50 section of the scheme at any time, the pension you would have built up had you always been in the main section of the scheme) is at least equal to that which you would have received had the scheme not changed on 1 April 2014. If it isn't, the difference will be added into your pension account when you draw your benefits.