At a Glance
✓ Reducing your hours or pay may reduce the pension you build up in the future.
✓ Reducing your working hours will not reduce any final salary benefits built up before 1 April 2014.
✓ Some ill health and death benefits may be affected by a reduction in pay.
✓ Some salary sacrifice arrangements may affect your LGPS benefits.
What if I reduce my working hours?
Since 1 April 2014, the LGPS has been a CARE scheme. This means that the amount of pension you build up each year is based on your actual pensionable pay.
If you work fewer hours, your pensionable pay will usually reduce. As a result, you will build up less pension in the future.
Example
Full-time salary: £18,000
1/49 × £18,000 = £367.35 per year
Salary after reducing hours: £14,400
1/49 × £14,400 = £293.88 per year
Difference: £73.47 per year of CARE pension built up during that year.
Final salary benefits
If you were a member of the LGPS on or before 31 March 2014, reducing your working hours now will not reduce the final salary benefits you have already built up. When calculating these benefits, a full-time equivalent salary is used rather than your part-time salary.
Reducing your working hours may also affect other scheme benefits. For example, the value of any future ill health benefits may be lower. Your death in service grant may also be lower because it is based on your pensionable pay.
What if I move to a lower-paid job?
If you move to a lower-paid job, the pension you build up from that date onwards will usually be based on your new salary.
This means that you will build up less pension in the future than you would have done had you remained in your previous role.
Final salary benefits
If you move to a lower-paid job, this may affect the salary used to calculate some final salary benefits. If you have final salary benefits, you may wish to consider the impact before making a decision.
Moving to a lower-paid job may also affect other scheme benefits. For example, the value of any future ill health benefits may be lower. Your death in service grant may also be lower because it is based on your pensionable pay.
Can salary sacrifice affect my pension?
Some salary sacrifice arrangements may affect your pensionable pay and therefore your LGPS benefits.
This includes:
- Green Car Scheme
- Buying additional annual leave
Schemes such as Cycle to Work, Shared Cost AVCs and Childcare Vouchers will not normally affect your LGPS pension.
Important: Gwynedd Pension Fund cannot provide financial advice. You may wish to seek independent financial advice before making a decision.