LGPS Pension Credits: Should I CARE?
Nov 27, 2014
Local Government Pension Scheme Pension Credits: Why Should I CARE?
Well you should and this is why. With effect from April 2014 the Local Government Pension Scheme switched to a CARE basis and at that time the methodology for implementing pension sharing orders also changed. CARE is short hand for career average and future benefits accruing under the Local Government Pension Scheme will not be based on final salary. Instead they will be based on a career average salary. This has implications for pension expert reports but there is a bigger change which has been slipped in at the same time.
Pension credit members have their benefits applied to the CARE section of the Local Government Pension Scheme and will receive only an annual pension entitlement with no automatic pension commencement lump sum from their pension credit. Previously a three times lump sum was automatic but now although a lump sum can be taken the pension credit member must commute pension to achieve this. You need to keep an eye on what is happening to the normal retirement age for a pension credit member too.
Details confirming these changes from the government actuary department can be found here.
By the way I would check any pension expert reports you have to ensure that this important change has been factored in. I have spotted instances post April where it has not!
So what about the other public sector schemes that have moved to a CARE basis. The Armed Forces Pension Scheme and Police Pension Scheme will be CARE from April 15. LGPS is already there and they have set the scene in terms of pension credit members effectively having what I think of as CARE benefits. Schemes are slow to release information about how they will do things – eg Pension Sharing Order implementation. So watch this space and be careful out there.