If you return to work in any job in which you are eligible to join the Local Government Pension Scheme, then you must inform the LGSS Pensions Service of your re-employment.
When returning to work after retirement, there is a possibility that your pension may be reduced if you receive certain enhancements to your pension. A new policy regarding the reduction of a pension in payment was introduced for both the Cambridgreshire and Northamptonshire Pension Funds in June 2014.
The new policy was required following changes to the LGPS from 1 April 2014 which meant that reduction can only apply to pension based on membership prior to 1 April 2014; no amount of pension built up after 31 March 2014 can be reduced.
If you started a new employment, or had a material change, such as a change in working hours, on or after the relevant date for the Fund that is paying your pension, the new abatement policy set out below applies. The relevant date for each Fund is:
Cambridgeshire Pension Fund – 26th June 2014
Northamptonshire Pension Fund – 23rd June 2014
Reduction of a pension is only considered where all or part of that pension is based on LGPS membership prior to 1 April 2014 and retirement was on the grounds of either redundancy efficiency and your former employer awarded you either:
- additional LGPS pension,
- additional LGPS membership, or
- a credited period (sometimes referred to as Compensatory Added Years or CAY), and you therefore receive Annual Compensation.
When reduction is considered, the annual pension will only be reduced if:
your annual rate of pensionable pay(1) from your new employment at commencement (or at the material change) plus your annual rate of pension in respect of membership prior to 1 April 2014 (A)
is more than your annual rate of pensionable pay(1) on leaving the employment (in respect of which the additional pension or membership or credited period was awarded) including cost of living increase (B).
If your pension is then reduced, the reduction to the annual pension in respect of membership prior to 1 April 2014 will be equal to the amount of the excess, with the annual pension in respect of membership prior to 1 April 2014 being suspended if the excess equals or exceeds the rate of that annual pension.
So for example, if (A) = £25,000, (B) = £20,000
(A) £25,000 – (B) £20,000 = (C) £5,000. Therefore your annual pension in payment would be reduced by £5,000, or by the amount of annual pension in respect of membership prior to 1 April 2014 if that is a lesser amount.
The reduction or suspension will last until you end this new employment, or until a material change in the employment requires a new assessment to be made.
Note: (1) In this context ‘Pensionable Pay’ means the Pre 1 April 2014 definition of the term.
If you are in any doubt about this topic please contact the LGSS Pensions Service.