Reduction in pay | Oxfordshire County Council

Reduction in pay

Information on what to tell employees and Pension Services following a reduction in pay

The Local Government Pension Scheme (LGPS) up to 31  March 2014, was a final salary pension scheme, with benefits assessed on ‘final pay’. Membership in the scheme before 1 April 2014 will keep its link to ‘final pay’ while continuous membership is recognised even when it continues after March 2014.  The type of protection for the final salary benefits will now depend on when the reduction occurs

The Local Government Pension Scheme (Benefit, membership and contributions) Regulations 2007 (as amended) defined the term ‘final pay’ and provides for alternative possibilities when the best final pay period is not one of the last three years of scheme membership. That definition continues in use beyond 2014 for the membership built under those and the 1997 schemes, because of the protections built into the new scheme.

From 1 April 2008, any member having a pay cut during continuous employment in the approved circumstances has the right, if leaving within 10 years of the pay reduction, to choose the best average of any three consecutive years in the last 13 of membership.  This right will continue even if the pay reduction happens after 31 March 2014

If the employee leaves within 10 years of the reduction, they may use the ‘Regulation 10’ option. This means the employee can choose to have the average of the ‘pensionable pay’ from any three consecutive years (years ending at 31 March) from their last 13 years of scheme membership. This election can give the member a level of reassurance about protecting the value of their pension built up before April 2014, under the final pay rules.

Pension Services must know that an employer,

  • has recognised a reduction in pay, one which fits the terms of the regulations.
  • will keep adequate pay records to support any election an employee may make
  • will be able to supply details for the member’s ‘pensionable pay’ and ‘final pay’
    • such as the whole time equivalent rates of pay – that is full time not term adjusted - and the effective dates of those changes. More guidance on ‘pensionable pay and final pay’ 

When the member leaves, complete full details of all the relevant periods/rates and effective dates on the ‘MARS’ return. It is important to remember that the member must make a written election to arrive at Pension Services  at least one month before leaving if they want to use this ‘Reg 10’  .

We believe it will be more practical for employers

  • to alert the member to the regulations,
  • advise Pension Services, and
  • start the appropriate record keeping

when a qualifying reduction in pay happens, rather than wait several years to support a request.

Although the member makes the election to the pension fund to use a different period , Pension Services will ask an employer to confirm that the member is making an eligible election.

The following templates and guides were prepared before April 2014, but the content is relevant while this protected provision remains. If you are in any doubt about the information you should supply to Pension Services please get in touch with us.

Download, complete and send to Pension Services

Pay changes to apply to a group?

Where the member has continuous membership and in the LGPS before April 2014 the link to final pay will continue, and the notes above apply for that portion of the pension.

Reduction in pay after April 2014  

Where the member has continuous membership and in the LGPS  before April 2014 the link to final pay will continue.

From April 2014, in the CARE scheme, pension builds up separately year by year without  protections for reductions to pay, unless pay is reduced due to  ill health, or paid ordinary child related leave.  A reduction in pay may mean a review of the contribution rate,  although this will depend on your policy.

Last reviewed
16 June 2017
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