Pension query

[Lala227]

For several years I worked full time for the local authority and have a defined benefit pension with them, which is career average. I now have a new job elsewhere, but still have an 'as and when' contract with the local authority where I do shifts on an ad hoc basis and am paid by the hour. I only do one or two a month so my pay from them is much lower than it was when I was employed full time.

I am just wondering if I am best to opt out of the pension scheme now as I might be effectively 'watering down' my career average? I'm struggling to get my head around the best thing to do, so any advice would be greatly received!

I think you need proper pension advice, book a free telephone appointment online with the pensions advisory service, as it sounds quite complicated.

@Lala227 I can understand your thought processes but career average as I understand it isn’t an average of everything you earn. Check with your pensions scheme but my understanding is at the end of each tax year they take 1/49th of your salary and “bank” it. Then the following year and all subsequent years it increases by CPI. So even though you are earning less your “banked” years are not affected and you may “bank” some pension now from earnings on an as and when basis.

If you were in the previous final salary scheme that is a different situation as they use your final salary. Again check with your employer, but my understanding is whilst you work they use the FTE salary to calculate this not your actual earnings so it is worth working on an as and when basis as your FTE salary will continue to rise.

In both cases talk to your pension provider and read the scheme rules. www.lgpsmember.org/your-pension/paying-in/how-your-pension-is-worked-out/

As others have said, the best thing to do is ask your pensions administration team that question to be sure.

However, for most career average schemes, you would be better to stay in and earn more pension because (i) full-time equivalent salary is used, not part-time and (ii) unlike a final salary scheme (where a low final salary can indeed sometimes "water down" past service) usually for a career average scheme that won't happen, because the impact of watering down the average salary is more than cancelled out by the fact that you have more pensionable service.

For example (and this is a made up example for illustration!) let's say you worked 10 years on a £20,000 salary and that gave you a pension of £3,300pa

If you switched to a lower paid role on £10,000 and worked two more years you would now have a lower career average salary of £18,000 - but you would have 12 years service, which would give a pension of £3,600 pa

It shouldn't go down.

But do check with your own scheme in case it works differently.

Are you in a union related to your LA employment? They often have arrangements for free financial advice on workplace pensions tailored to your particular circumstances.

Americansmoothy is correct. You continuing to work doesn’t affect anything already built up.