If you were in the scheme before 1 April 2014

Before 1 April 2014, the LGPS was a final salary scheme. Even though everyone was moved into the CARE scheme from that date, any pension you built up under the final salary scheme will always be calculated under final salary rules.

Final salary pension is worked out differently to pension after 1 April 2014. Instead of calculating pension to add to your pot on an annual basis, final salary pension benefits are only calculated when you leave the scheme or retire.

To work out your final salary pension benefits, we use:

• final pay
• membership

When you stop paying into the LGPS, your employer will provide us with your final pay. The final pay is different to your pensionable pay which is used to calculate your pension benefits built up before 1 April 2014.

The final pay is an average of your full time equivalent pay in previous 12 months before your leaving date.

Full time equivalent means what you would have received if you had worked in your roll on a full time basis.

The final pay used in the calculation of your pension isn’t necessarily the final full time equivalent salary before your leaving date. It is an average figure to take into account of any pay figures throughout the year.

Here is an example of calculating final pay for someone who left the scheme on 31 October 2022.

Their final full time equivalent salary was £24,500, however, they had a pay rise on 1 April 2022, before that, the full time equivalent salary was £23,200. We will need to proportion the pay for each period.

We can also use either of the previous 2 years before your final year, if either of these figures are higher when multiplied by the pensions increase for that particular year.

If your take-home pay changed because you went part time, or changed your hours, this will not impact on your final salary pension. This is because we use the full-time equivalent salary rather than your actual pay in the calculation.

However, if you do have a change in your full-time equivalent salary this could impact on your final salary pension. An increase could mean a higher pension and a decrease could mean a lower pension.

If you had a drop in your full-time equivalent pay after 1 April 2008, you may be entitled to a protection which allows us to use an earlier final pay, if it is higher.

We will write to you to ask you if you think you may be entitled to this protection when you leave the scheme. If you believe you might be, you should confirm this to us, and we can investigate it further.

For more information, see How a drop in pay affects your pension

Your membership in the final salary scheme is also used in the calculation of your pre 1 April 2014 pension benefits and was supplied to us by your employer. You can see the final salary membership details we hold for you on your annual benefit statement or My Pension Online.

Membership isn’t necessarily the number of years you were in the scheme, it is proportional to the hours worked. If you worked part-time or term-time only, it would have taken you longer to build up membership than someone who worked full-time.

You may also build up membership because you have had a transfer into the scheme before 1 April 2014, or you purchased added years or additional pension.

The formula for calculating final salary pension is different before and after 1 April 2008.

• for final salary pension built up between 1 April 2008 and 31 March 2014 we use the formula: membership x final pay x 1/60
• for final salary pension built up before 1 April 2008 we use the formula: membership x final pay x 1/80 

Additionally, if you were in the scheme before 1 April 2008, you will receive an automatic tax-free lump sum which is sometimes called ‘the retirement grant’. The automatic lump sum will be 3 x the Annual pension built up before 1 April 2008.

If you joined after 1 April 2008, you can still choose to take a lump sum when you retire.

You may be entitled to a protection known as the underpin if you were:

• paying into the LGPS or another public service pension scheme before 1 April 2012
• were a member of the LGPS at any point between 1 April 2014 and 31 March 2022 and were under age 65 for any part of this period

The above applied only if you do not have a disqualifying gap.

If you qualify, we can calculate pension benefits built up in the CARE scheme between 1 April 2014 and 31 March 2022 as final salary pension if it results in an increased pension.

You don’t need to ask us to look into underpin protection for you, we will check this automatically on your behalf when you stop paying in.

The qualifying rules for the underpin protection changed on 1 October 2023 following a court of appeal ruling known as The McCloud Judgement. This has meant many more people are entitled to underpin protection.

Find out more about the changes as well as how the underpin works by visiting The McCloud Judgement.