Drop in pay or hours

Pension built up from 1 April 2014

Each year's pension is based on that year's pay. If your pay drops – for example, because of a drop in grade, reduced hours or less overtime – then you will build up less pension that year.

Your pension should not be affected if your pay drops because of sick leave or during the first 26 weeks of maternity or adoption leave. The pension you build up while on reduced pay will be based on your pay in the 12 weeks or three months before the pay dropped.

Your pension will be affected if your pay drops because of another type of absence. Depending on why you are absent, you and your employer may be able to pay additional pension contributions (APCs) to make up for the effect this has on your pension. See the Absences section to find out more.

Pension built up before 1 April 2014

If you:

  • built up pension before 1 April 2014 and
  • have not had a break in membership of five or more years

then your pension in respect of that membership before 1 April 2014 is linked to your final whole time pay, even if you work part time. Final pay is usually what you earn in your last 12 months of membership.

Pension you built up by 31 March 2014 could be affected if your pay is frozen or drops. It could be protected if you retire or stop contributing to the LGPS less than 10 years after the pay freeze or pay drop.

Protections for benefits built up before 1 April 2014

1. Best of the last 3 years' pay

Your employer should automatically assess the best of your last three years' pay when you leave the scheme. The highest pay from any of the three years before you leave the LGPS will be used to calculate the final salary portion of your pension. This will protect your pension if you leave fewer than three years after a drop in pay.

2. Best 3 year average in the last 13 years' pay

You can ask your employer to check your pay from the last 13 years if:

  • you moved to a lower paid role because your employer requested this or you chose to
  • your pay fell or was frozen after 31 March 2008 and during continuous employment

What should I do?

Contact your employer before you leave and request the best three years in 13 calculation.

Your employer only has to check your last 13 years' pay if you ask them before you leave.

What will happen?

Your employer:

  • will work out your average pay for each consecutive three years in your last 13 years. They will look at years starting on 1 April and ending on 31 March.
  • will use the best pay three year average figure. If the pay used is from a year earlier than your final year, then your pension will also receive a cost of living increase based on the later of the three years used (in line with pension review orders issued by HM Treasury)

You can't ask for a best 3 years in 13 calculation if:

  • your pay has stayed the same because you have reached the top of your pay scale
  • employees did not receive a pay rise that year – pay rises are not contractual
  • you have had a temporary pay increase and this has now ended
  • you have reduced your hours
  • you have taken flexible retirement

3. The Underpin

If your pension is protected by the Underpin, when you leave work, retire or opt out, your pension will be calculated using the current LGPS rules, but it will also be calculated using the rules that would have applied before April 2014. You will receive the benefit of the higher calculation. See: Underpin protection.