Local Government Pension Scheme (LGPS)
The LGPS benefits which you have built up will be paid immediately without any early retirement reductions if you are made redundant or retiring on the grounds of business efficiency, providing you meet the following criteria:
- you will be aged 55 or over at the date you are made redundant or retire on the grounds of business efficiency
- and you have been a member of the LGPS for at least two years
The following are a set of frequently asked questions about retirement from the LGPS on redundancy or business efficiency grounds.
Does business efficiency retirement include our voluntary early retirement (VER) scheme?
Yes, if you are aged 55 or over with at least two years’ LGPS membership, we formally approves an application for VER and you are retiring early by mutual consent, your LGPS pension benefits are payable immediately on retirement without any reductions for early payment.
If I voluntarily retire early and meet the age and LGPS membership criteria, will my pension benefits be payable without reduction?
No. If you voluntarily choose to take your pension before your normal pension age, it will normally be paid at a reduced level because it is being paid early. The earlier you voluntarily take your LGPS pension, the bigger the reduction will be.
What is the normal pension age?
Your normal pension age is linked to your State Pension age and is the date you can take the LGPS pension you have built up in full without any reductions being applied.
What happens to my LGPS pension if I am made redundant under age 55?
If you are under age 55 when you are made redundant, your LGPS pension cannot be paid. You will become a deferred member of the scheme and you will be able to take your pension, at the earliest, when you reach age 55. A reduction will be applied to your pension benefits if you decide to take them before your normal pension age.
What happens to my LGPS pension if I am made redundant and have less than 2 years’ membership in the pension scheme?
You must have at least 2 year’s membership in the LGPS to qualify for pension benefits.
If you have been a scheme member for less than 2 years at your date of leaving us, you will normally be able to claim a refund of pension contributions. Your refund will be less than the contributions you paid, as tax will be deducted to replace the tax relief which would have applied when you contributed to the pension scheme.
Alternatively, you may be able to transfer your pension to a different pension arrangement. Derbyshire Pension Fund will contact you with information about your options after your date of leaving.
If I am made redundant or I am retired on the grounds of business efficiency will by pension be enhanced to my normal pension age?
Your pension is not automatically enhanced when you are made redundant or retired on the grounds of business efficiency. Our policy is that it will not agree to enhance pension benefits.
Following a redeployment to a lower paid position, how will a pay decrease after a period of pay protection affect my pension?
Your pension is worked out using your pay details. If your pay changes, your pension may be affected. Pension benefits are worked out differently for membership before and after 1 April 2014.
Before 1 April 2014 - The LGPS was a final salary scheme. Your pension will value your pre-1 April 2014 membership under final salary rules using details of your ‘final pay’.
’Final pay’ is worked out using your full-time equivalent salary rates.
An application to protect your pension from a substantive pay decrease which occurred between 3 years and 13 years before your date of leaving must be submitted no later than 30 days before you are due to leave.
After 1 April 2014, The LGPS became a Career Average Revalued Earning (CARE) scheme. If your pay decreases, the amount that you build up in your pension will be less than you would have built up before the decrease in your pay applied.
Similarly, a reduction in contracted hours, which results in a lower amount of pay, will affect the amount by which your pension builds.
Protections apply if your pay reduces because of absence due to sickness, injury or certain types of child-related leave.
If you are issued with a new contract of employment, you will get the option to keep your pension records separate. Information on how to apply for this will be included in your new contract.
What is the rule of 85?
The rule of 85 only applies if you joined the LGPS before 1 October 2006. It protects your pension benefits built up by 31 March 2008 from any reductions for early payment at age 60 or later when your age added to your LGPS membership (in whole years) reaches 85.
If you are being made redundant or retiring on grounds of business efficiency, your pension is not reduced for early payment, so the rule of 85 will have no effect on the pension benefits payable to you.
How can I get a pension estimate to show what my pension may be on redundancy or voluntary early retirement?
If we decide to consider you for redundancy or through the voluntary early retirement scheme, arrangements will be made for you to receive an estimate of your LGPS pension benefits directly from Derbyshire Pension Fund which administers the LGPS for our employees.
Your estimate will not include the value of any Additional Voluntary Contributions (AVCs) which you may have. However, the Pension Fund will contact your AVC provider and include your options in the letter you will receive when you have retired.
If your AVC is with Prudential and you wish to find out the value of your AVCs as part of your retirement planning, you must contact Prudential directly.
If your AVC is with a different provider, you must contact Derbyshire Pension Fund to arrange for a request to be submitted to your AVC provider via the Fund.
Can I decide to defer taking my LGPS pension if I am made redundant or retire on the grounds of business efficiency?
No. The LGPS regulations require that you must take your pension benefits when you are made redundant or retire on grounds of business efficiency and meet the age and LGPS membership criteria. There is no option to defer payment to a later date.
How do I claim my pension benefits if I am made redundant or retired on grounds of business efficiency?
If you are aged 55 or over at the date your employment ends, we will confirm your leaving details to Derbyshire Pension Fund. The Fund will then work out your pension benefits and contact you directly to arrange payment of your benefits.
Will I be able to take a lump sum from the pension fund when my employment has ended?
Yes. If your LGPS membership includes a period before 1 April 2008 you will normally be entitled to an automatic tax-free lump sum as part of your pension benefits. If your membership started on or after 1 April 2008 you will not be entitled to an automatic lump sum, however, you will have the option to exchange some of your annual pension for a tax-free lump sum.
The pension fund will set out your options when they contact you about payment of your pension benefits.
When will my pension start?
The start date of your pension will be the day after your employment ends as a result of redundancy or business efficiency.
Your pension is then payable for your lifetime.
Your first pension may take a little longer to pay as arrangements for your pension to include all of your final month’s pay details can sometimes delay the pension calculation.
Will my pension be paid on the same day each month as my salary?
No. Your salary is normally paid to you by us on 25 of each calendar month. Your pension paid date will normally be the last working day of every month.
Will my pension benefits be affected if I become re-employed after being made redundant or retired on grounds of business efficiency ?
No. If you become re-employed, your LGPS pension will not be affected.
Can I join the LGPS for my re-employment?
If the post you obtain after your retirement is eligible for the LGPS, your employer will normally automatically enter you into the scheme and you will begin a new pension record.
For further information about the LGPS, please visit Derbyshire Pension Fund's website.