Authorised Unpaid Leave

Taking unpaid leave will, under the LGPS Regulations 2013, result in the member accruing less pension in the relevant scheme year.  The member has the right to make up the pension shortfall, by electing to buy the amount of ‘lost’ pension via an APC/SCAPC contract.

Where unpaid leave is authorised (any period up to 36 months), or where there is a period of unpaid maternity, paternity or adoption leave the cost of the APC will be shared with the employer, (SCAPCs), with the employer paying two thirds of the cost, the member will pay one third.  Please note that the regulations state that for the cost to be shared with the employer the member must elect to buy back the amount of ‘lost’ pension within 30 days of their return to work.  However, you do have the option to choose to contribute towards the cost, if the election is made later; this would be a discretionary decision so you may wish to be clear at the outset under which circumstances you may do this.  You may, for example, wish to give the member a 30 day period from the date of your letter to them in which to make an election.  You would need to be clear that any elections received after this date would result in the member paying the full cost of the APC.

It is important that the member knows their unpaid leave has affected their pension accrual and that they have the right to pay additional contributions to make up the value of any pension lost.  Some suggested wording/template letter, which you may wish to use when writing to your employees can be found at the bottom of this section.  Please adjust as necessary.  Please ensure you keep a record of when the information was sent in case of any future dispute.

You may wish to write to the member when they return from their leave, or you may wish to write to them at the point when, as an employer, you have agreed to them taking unpaid leave.  Some employers may wish to send a letter at the point of agreement (though watch those members on parental leave as it may not be picked up that they are moving to an unpaid period) and making a requirement that the member signs and returns the letter to evidence that they have been given the information.  Larger employers may wish to run a report from payroll each month to identify members who have unpaid leave and write to them with a 30 day deadline as at the date of the letter.

Our suggested procedure is for you to identify those affected in the way that operationally suits you best and then send a letter with the attached wording. 

PLEASE NOTE – there is a requirement for you to insert into the letter the amount of pay lost due to the absence.  The letter explains the position to the member who may, if they wish, follow the link provided to take them to the on-line calculator.  The information provided is excellent and it includes them acknowledging they have read the ‘terms and conditions’.  The member can use the calculator to establish how much pension they have lost and the cost to them, (taking into account Shared Cost where applicable) should they wish to purchase pension to this value.  They can then proceed to request to pay and an election form is automatically created for this purpose.  The form is then downloaded and the member sends it to their administering authority and employer.  You will also need to add the appropriate contact details for any employees without access to a computer.  This would be a person / department in your establishment who could access the form and information on their behalf.

The administering authority has the right to require a satisfactory medical report for any application to purchase additional pension,  although it is unlikely we will require this where the member is buying back a shortfall in pension due to unpaid leave (it will be required for members simply purchasing APCs for extra pension).  APC contracts are paid off in full if a member retires on ill health grounds.  In most cases of unpaid leave the sums involved will be small, but if you have concerns about the need for a medical report please highlight this to us.  

Once an election is received, the employer must verify it by checking the amounts are valid and ‘Shared Cost’ is applicable.  Then please notify your payroll of the applicable deduction(s) and forward a copy of the relevant paperwork to us to ensure any additional pension purchased is recorded and added to the members pension account.  Please keep a copy for your records.

Sample Letter for Scheme Members with Unpaid Leave

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