All pension benefits built up from 1 April 2014 will be calculated on a Career Average Revalued Earnings (CARE) basis.
The amount of pension you build up is based on your actual pensionable pay. Each year 1/49th of your pensionable pay and any assumed pensionable pay is put into your pension account. At the end of the year the pension you have built up increases in line with the cost of living – Consumer Price Index (CPI).
So the calculation would be based on:
Actual Pensionable Pay from 1 April to 31 March ÷ 49 = Annual Pension
When you retire you will also have the option to exchange part of your pension for a tax free lump sum – this is known as commutation. You are able to commute up to 25% of the capital value of your benefits. For every £1 of pension you exchange, you will receive £12 of cash lump sum.
£1 pension = £12 tax free cash lump sum
Any non-contractual overtime worked will be included in the calculation of your pension.
All pension benefits built up on or before 31 March 2014 will be calculated on a Final Salary basis when you retire, but using your pensionable pay at the time of retirement.
Your Final Salary pension benefits are calculated differently depending on when you built them up.
Pension Benefits built up to 31 March 2008
Your pension benefits built up before 31 March 2008 will be calculated at 1/80th of your final pay at the date of your retirement, together with an automatic lump sum.
Membership (years and days) ÷ 80 x Final Pay at retirement = Annual Pension
Annual Pension x 3 = Automatic tax free lump sum
Plus, you still have the option to exchange some of your pension for an additional lump sum. For every £1 of pension you exchange, you will receive £12 of cash lump sum, up to a maximum of 25% of the capital value of your benefits.
£1 pension = £12 of tax-free cash lump sum
Pension Benefits built up from 1 April 2008 to 31 March 2014
Your pension benefits built up from 1 April 2008 to 31 March 2014 will be calculated at 1/60th of your final pay at the date of your retirement, with no automatic right to a lump sum.
Membership (years and days) ÷ 60 x Final Pay at retirement = Annual Pension
You have the option to exchange some of your pension for a tax -free lump sum (up to a maximum of 25% of the capital value of your benefits). For every £1 of pension you exchange, you will receive £12 of cash lump sum.
1 pension = £12 of tax-free cash lump sum
When you retire your Final Salary and CARE benefits will be added together to give you your total pension benefits. You will also be given the option to give up part of your pension to receive tax free cash (also known as a commutation).
If you have built up any pension benefits before 2008 you will have an automatic lump sum in respect of these pension benefits. This lump sum will be in addition to the lump sum you receive from giving up part of your pension.
Further Protection
When the scheme changed on 1 April 2014 further protections were put in place to protect members who were close to retirement age. This was to ensure your pension remains equal to the pension you would have received if the scheme had not changed.
The protection applies to you if you were:
- paying into the Scheme on 31 March 2012, and
- within 10 years of your Normal Pension Age (normally age 65) on 1 April 2012, and
- without a disqualifying break in service of more than 5 years, and
- not taken any benefits from the LGPS before Normal Pension Age and
- you leave with an immediate entitlement to benefits
If you are entitled to this protection, when you retire we will check that the pension you have built up is at least equal to the pension you would have received had the scheme not changed on 1 April 2014. Ensuring you will always receive the ‘best deal’.
What if I started in the Scheme on or after 1 April 2014?
If you joined the LGPS on or after 1 April 2014 all your pension benefits will be calculated on a CARE basis. Any information regarding ‘Final Salary’ will NOT apply to you.
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