Protection for members facing compulsory reduction in pensionable pay

UNISON members who have suffered a material reduction in their pay through circumstances out with their control – such as the new terms and conditions implemented 1st March 2015 – should be aware that protection is available within the Local Government Pension Scheme (LGPS).

The ‘Certificate of Material Change’ or ‘Certificate of Protection’ is a document issued by an employer if an employee has a compulsory reduction in pensionable pay.

P&OD and Payroll have confirmed they are in the process of dealing with certificates for everyone who suffered financial loss and staff affected financially will receive a copy of their certificate automatically in due course.

If members have not received their certificate by end of July 2015 or would like more information then please contact P&OD directly.

​Regulation 22 of the Local Government Pension Scheme (Scotland) Regulations 1998 provides a degree of protection for members who suffer a reduction in their pensionable pay through circumstances outwith their control including the member’s ill health. This provision is carried forward by regulation 43 of The Local Government Pension Scheme (Administration) (Scotland) Regulations 2008.

Scheme members who experience a drop in pensionable pay are entitled to a certificate of protection from their employing authority. The employing authority may issue a certificate without an application from the member, but need not issue a certificate if the member does not apply for one within 12 months after the date of reduction or restriction.

Reduction in Pensionable Pay

A Certificate of Protection can be issued by the employer if an employee has a compulsory and material reduction in contractual pensionable pay:

1. because the employer has compulsorily changed the member’s employment to employment at a lower grade or with less responsibility;

2. as a result of a job evaluation exercise;

3. because the employer has made a compulsory change to the employee’s contract of employment resulting in the cessation of, or reduction in, payment or benefits specified in the employee’s contract of employment as being pensionable emoluments.

Issue of Certificate of Protection:

In any of the situations outlined above a certificate may be issued either:

1. at the request of the employee within 12 months of the relevant reduction in pensionable pay    OR

2. by the employer at any time

Lapsing of a Certificate of Protection:

In the case of a certificate issued in respect of a material reduction in pensionable pay, the Certificate lapses at the end of 10 years or, if earlier:

a) upon the employee ceasing to hold the [job] employment in respect of which the Certificate was issued without becoming entitled to immediate payment of retirement pension in relation to that [job] employment … OR

b) upon opting to cease active membership of the LGPS … OR

c) upon the Certificate being applied to benefits drawn on flexible retirement.

The Process

• The employer should complete a Certificate of Material Change in Circumstances form (S20) for any employee whose pay is reduced, partly restricted or is to remain static over one or more future pay increases. The employer, employee and SPFO receive a copy each.

• The member’s pension benefits on leaving will be protected for up to 10 years from the date of the reduction. It is a statutory requirement that the employer must keep a record of all pays for that member during this period, including for the 3 years prior to the reduction or restriction of pay.

• In any case where a Certificate of Material Change in Circumstances form is recorded by SPFO and the member leaves within 10 years of the reduction, a calculation will be performed to ensure the best pensionable pay is used when calculating a scheme benefit in respect of that member.