Your pension is calculated in each scheme year using your pensionable pay. If your pay is reduced, the pension you build up each scheme year will be less.
Reduction in pay may affect other benefits such as death, ill health, and redundancy. Find out how a reduction in pay may affect other benefits.
Paid into the scheme before 1 April 2014
Your benefits up to 31 March 2014 are calculated using your final salary pensionable pay. We will use the best of:
- the pay you have received in the last 12 months before leaving, or
- the highest pay from the last 3 years, or
- the biggest average of 3 years pay in the last 13 years with the same employer, after allowing for inflation.
This means there are options for you at retirement if your pay drops. You must contact your employer before retirement if you think a reduction in pay may affect you. They will provide us with your previous years’ pay.
You cannot use the best average of 3 years pay if the reduction to your pay was because of:
- the loss of a temporary increase in pay, or
- the result of taking your retirement benefits on flexible retirement.
Change of employment
If you have a new employment you may be offered the opportunity to separate your pension benefits. For example, award a deferred pension based on the higher rate pay and start a new pension account. This does not apply if you change your post. We will write to you to let you know.
You will not pay contributions on protected pay if your post is downgraded.
Things to consider if you have the option to separate your pension
Deferred benefits increase in line with inflation. Salaries sometimes exceed inflation with the possibilities of promotion and career progression. Your earnings in the lower paid post may eventually exceed your final pay (together with inflation proofing) used to calculate the deferred benefits. If you are sure this will not happen, separate benefits may be the best option for you.
You may have some protection from reductions for early payment of benefits depending on your:
- Age
- Service
- Regulations under which your benefits are awarded.
If you choose to split your pension, the protection only applies to your deferred benefit. It does not apply to your new employment.
If you are made redundant over age of 55 and have more than 2 years membership, your pension benefits are brought into payment immediately. If you have split your pension, only your latest pension account will come into payment. View further information about redundancy.
If you have more than 2 year’s membership and you are retired on ill health grounds, your current pension is paid at any age. You have to apply for payment of your deferred pension separately on ill health grounds.
The deferred benefit is payable in full at State Pension age (SPa) and increases in line with inflation. You can take it from age 55 but it may be reduced for early payment. You can take your deferred pension whilst you remain working and building up your new pension account.