The Local Government Pension Scheme (LGPS) is a statutory, funded pension scheme. This means you can look forward to enjoying a guaranteed package of benefits when you retire. It’s a very secure scheme, because its benefits are defined and set out in law.
The LGPS and scheme rules have changed over time and to ensure members are not unjustly affected by this, rules are included to protect members and their benefits. The rules which could protect your pension from reductions if you retire early are the 85-year Rule and the Underpin.
The 85-year rule
If you were a member of the LGPS at any time 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.
You satisfy the 85-year rule when your age and length of LGPS membership add up to 85. Your age and Scheme membership are both measured in full years for this purpose. If you work part time, your membership counts towards the 85-year rule at its full calendar length.
The 85-year rule will apply if you are over age 60 when you retire. If you fully retire between age 55 and 60, the 85-year rule will not automatically apply and your benefits will be reduced. Your employer can choose to allow the 85-year rule to apply. This is a discretion. You can ask your employer about their policy on this.
If you take flexible retirement, the 85-year rule will apply to the benefits you have built up to the date you first take flexible retirement, even if you are under 60. The 85-year rule will not protect any benefits you build up after you first take flexible retirement.
What the 85-year rule means for you depends on your age, the date you meet the 85-year and the date you take your LGPS benefits. If you are thinking of retiring, you should request an estimate of the benefits you will be entitled from the Fund which will show any protections and reductions, if you have not met the criteria for the 85-year rule.
If you are thinking about flexible retirement, you should contact your employer to check their policies on flexible retirement.
The Underpin
When the LGPS changed to a career average scheme in 2014, older Scheme members were protected from the changes. This protection is known as the underpin. The underpin ensures that protected members get a pension that is at least as good as they would have received if the Scheme had not changed on 1 April 2014.
The underpin applies if you:
- were an active member of the LGPS on 31 March 2012
- were within ten years of your Normal Pension Age on 1 April 2012 (generally age 65)
- haven’t had a break in active membership of a public service pension scheme of more than five years after 31 March 2012
- haven’t taken any career average benefits from the LGPS before the date the underpin is worked out. This is the earlier of the date you leave the Scheme or age 65. It may be an earlier date for the small number of LGPS members who had a protected Normal Pension Age of 60
The underpin can also apply if you were an active member of another public service pension scheme on 31 March 2012. The protection will only apply in the LGPS if:
- you transfer the pension benefits from the other public service pension scheme into the LGPS
- some or all of the transfer value buys final salary benefits in the LGPS
- the break between leaving the other public service pension scheme and joining the LGPS is less than five years
- you were within ten years of age 65 on 1 April 2012
- you haven’t taken any career average benefits from the LGPS before the date the underpin is worked out. This is the earlier of the date you leave the Scheme or age 65
The underpin will not apply if you:
- leave without an immediate entitlement to benefits
- elect to opt out of the LGPS before your protected Normal Pension Age (age 65 for almost all)
If you are protected, your pension fund will perform an underpin calculation on the earlier of:
- the date you leave the Scheme
- your protected Normal Pension Age (age 65 for almost all)
We will check that the pension you have built up in the career average scheme is at least as good as you would have built up in the final salary scheme. If it isn’t, your pension will be increased.