A period of absence from work without pay can have an effect on a member's pension.
An employer’s payments and information that must be provided depends on the reason for the reduced pay Pensions must be protected when caused by certified sickness. Other authorised unpaid leave requires the member to take steps to restore the pension. For example, authorised/approved unpaid leave including unpaid child-related leave.
Statutory protection for pensions
Protection to LGPS pensions is offered by reporting an ‘assumed pensionable pay’ (APP) on the monthly returns. This value based on previous 13 weeks or 3 months pensionable pay is used for employer contributions and for the pension value going to the pension account at the end of the year.
It is the employer’s responsibility to tell the member whenever APP is used and about the value of their ‘lost pay’ following an authorised period of unpaid leave.
The main points for restoring 'lost pension'
All fund employers must have a policy about on whether to extend the time, beyond 30 days from the return to work, for members to decide about restoring the pension after their time off with no pay
Employers must have a published policy indicating under what circumstances they will share costs with members beyond the statutory time limits.
Visit the pensions forms for employers page for template letters for you to personalise.
There follows the main stages for a person to buy back 'lost pension' after a period of approved unpaid leave. But do remember every employer should have:
Agree period of unpaid leave with your employee
- A period of approved no pay will affect an employee's pension.
- Employers should tell employees about their options.
- Complete MARS to show start date of approved unpaid leave.
Return to work
- Inform your employee of their 'lost pay' for the period.
- Use the template letter to give employee enough information to find out the cost to buy back the 'lost' pension. Member uses interactive tools on www.lgpsmember.org for quote and application.
- Complete MARS with return to work date.
Member's choice; time limits and employer action
- If member wants to restore 'lost pension' they must send you and Pension Services each a copy of the completed application.
- If election is within 30 days of return to work, or if the employer has agreed to a longer period, employer MUST pay 2/3rds cost (shared cost additional pension contribution SCAPC).
- Employer and Pension Services must agree employee's request is eligible before deductions can begin.
- Repayment must be either a single lump sum or instalments. Period for instalments must be in whole years. When request to pay instalments is for a period greater than one year, the member must supply a medical certificate (see member forms page)
- Application for instalments of less than £5 per month are not acceptable by this fund and restoration must be in a single lump sum.
- When Pension Services approve the application, set up deductions, complete MARS and contribution return.
- Any variation in terms must be covered in your policy document and agreed by this fund.
Please note: you may not divide a lump sum cost to recover in smaller portions.
What if the employee misses the 30 day time limit?
Will the employer consider extending the 30 day limit, introduced by amending regulations April 2015?
- Member can still buy the 'lost pension' but without employer's contribution.
- Member returns to www.lgpsmember.org for new quote for additional pension contribution (APC).
- Employer may consider supporting employee costs to restore lost pension using their Shared Cost Additional Pension Contribution policy (SCAPC).
If the member wants to buy an additional pension, use the process above although subject to your written policy, you would not be contributing.
Shared cost additional pension contribution (SCAPC) and elections
There will be liaison with Pension Services and the Fund Investment team concerning the process for a shared cost additional pension contribution. Elections to restore lost pension, made in the regulatory timetable must be shared cost.
Supporting your employees
Please be prepared to help your employee to get the quote and application from the national website www.lgpsmember.org or encourage them to contact Pension Services.
The forms for employers page includes template letterss for you to adapt and use.
Please note different procedures apply during unpaid sick leave or leave for reserve forces.