If you change your weekly hours or term-time weeks of employment the benefits you build up within the Local Government Pension Scheme (LGPS) will be affected as, since 1 April 2014, it is your actual earnings that are used to determine the amount of pension you build up.
For the majority of our members we class part-time employees as anyone whose contractual hours of work are less than 37 per week for 52.143 weeks of the year. A part-time employee may also be someone who works 37 hours per week but for less than 52.143 weeks of the year such as an employee of a school who works during term-time only.
How does part-time employment affect my membership of the LGPS?
The LGPS is a Defined Benefit (DB), Career Average Revalued Earnings (CARE) pension scheme. As such benefits are defined in line with statutory regulations and based on your pensionable pay in each year from 1 April to 31 March (this is known as the 'scheme year').
For each scheme year that you are a member, a pension equal to 1/49th of your pensionable pay will be added to your pension account. Your pension account is revalued every April in line with CPI to ensure that your pension account keeps up with the cost of living.
Benefits are not based on the contributions that you and your employer pay into the scheme (as they would be if you belonged to a 'money purchase' scheme).The longer you are a member of the scheme, and the greater your pensionable pay, the higher your benefits will be when you retire or leave the scheme.
The pensionable pay used in the calculation of your pension will reflect periods of full and part-time employment that you may have.
How does part-time employment affect my pensionable pay?
As we have already mentioned your pension is built up based on 1/49th of your pensionable pay during each scheme year running from 1 April to 31 March. The pensionable pay is the amount of pay on which you pay contributions. It includes non-contractual (as well as contractual) overtime and any additional hours worked in excess of your contractual hours. If you are part-time the pensionable pay used calculating your pension will be your actual part-time pensionable pay from 1 April to 31 March each year.
EXAMPLE:
An employee works full-time for 1 year in the LGPS from 1 April 2014 to 31 March 2015. Their annual pensionable salary is £26,500.
The pension they will earn for that year is calculated as follows:
£26,500 X 1/49 = £540.82
This will mean that £540.82 will be added to the member's pension account for 2014/2015.
If, however, the same person worked at 50% of full-time for that year, his pension would be calculated as follows:
£13,250 X 1/49 = £270.41
This will mean that £270.41 will be added to their pension account.
Is it possible for me to draw my pension benefits and continue working?
Since April 2006 the LGPS Regulations have allowed employers the discretion to release scheme members' benefits whilst keeping them employed on reduced hours or at a lower grade. This is known as 'flexible retirement'. Once you reach the age of 55 your employer can agree to the release of your benefits thereby avoiding the perceived "cliff-edge" that many face at retirement. Benefits released early may be subject to reduction if you do not satisfy certain conditions of the scheme, although your employer also has discretion to waive any reduction that may be applied.
Can I continue to pay contributions on my full-time equivalent pay if I work part-time?
No. You can only pay contributions on the actual pay you receive. There are ways in which you can increase your pension benefits by paying additional contributions but these would be deducted from your part-time pay. The options you have are to pay Additional Pension Contributions (APCs) into the LGPS or pay Additional Voluntary Contributions (AVCs). You can even pay into your own Personal Pension or a Stakeholder Pension Scheme. If you are interested in knowing more about these options a guide to 'Increasing Your Pension Benefits' is available.
What about my death in service cover if I go part-time?
As a member of the LGPS there is a lump sum death grant payable in the event of your death. This is equal to 3 times your assumed pensionable pay. For part-time employees this is your actual part-time pensionable pay. You can state to whom you would like your death grant to be paid by completing an 'Expression of Wish' form.
Are any other benefits affected by going part-time?
If you reduce your hours, perhaps because of poor health, you need to consider the impact that this could have of any future ill-health retirement. If your employer agrees to your early retirement because of permanent ill-health, any enhancement afforded by the scheme may reflect the part-time nature of your job.
To find out more about how your part-time hours will affect your membership you can download our factsheet 'Impact of working part-time'. If you would prefer to have a copy of this factsheet forwarded to your home address please contact us on 01628 796 668.