Changes to some assumptions on the cost of the LGPS mean that factors applied to the LGPS are changing.
This doesn’t affect how benefits are calculated. That would require a change in the LGPS regulations. But it does affect factors including early and late retirement and how transfer values are calculated that are set by the Government Actuary’s Department (GAD) and can change at any time. It is likely to mean that if you are planning on retiring early from the LGPS your pension will be marginally less if you retire after the early retirement factor is changed.
UNISON has raised the issue of the imminent change and is seeking urgent clarification. What we know is that the early retirement factors are likely to be changed shortly. We do not know when. It has been reported that the factors will be changed over a six-month period starting from June. We are pushing for transitional protection but there is no guarantee it will be given. If you are in the process of retiring and have given notice, then there is a higher chance you may get transitional protection. The GAD has yet to give any idea of what the increase in the early retirement factor will be, although it may be in the region of around 2% more based on previous changes when the early retirement factors were improved – but this is speculation.
What the effect will be will depend on the age of the member at early retirement and what service in the different sections of the scheme the member has.
Benefits earned before April 2008 will have a reduction factor counting back from age 60 or when they satisfy the rule of 85 if later than 60.
Counting back from age 65 for the 6 years from April 2008 to April 2014 and your state pension age for service after April 2014 to date of retirement. You should check your state pension age, but it is likely to be around 67 for those thinking of retirement at the present time.
Clearly the longer the member works the more pension they can earn and the lower the early retirement factor. Other factors are changing including late retirement which is likely to improve. Also, factors applying to transfer values for service coming in or going out of the scheme. Employers have been advised and they should be telling those seeking to retire soon that figures may change. We are trying to find about more about when and how much the factors will change as a matter of urgency. In the meantime, please do what you can to let members thinking of retirement that early retirement reductions may increase.
As soon as we know more, a further update will follow.
