Thinking of joining one of the largest pension funds?
When you retire, you want more than just the state pension to live on. If you want to ensure a good standard of living during your golden years it is important that you join a workplace pension scheme. Not only can you start saving for your retirement, you also get tax relief on any earnings you pay into your pension. Oh, and did we mention that your employer pays a significant contribution as well?
The Local Government Pension Scheme is often viewed as one of the most valuable financial rewards of your job providing you with a secure, Government backed, guaranteed income, when you retire. You don’t have to worry about stock market crashes the benefits you build up are guaranteed and adjusted in line with the cost of living so they will never lose their value.
Who can join?
To be able to join the Local Government pension scheme you need to be under age 75 and work for an employer that offers membership of the scheme.
The scheme is offered by local government employers and by other organisations providing public services in England and Wales. If you are employed by a town/parish council, charity or private company participating in the LGPS, you can only join if your employer nominates you for membership of the scheme.
If you start a job in which you are eligible to join, membership is automatic, if you are a permanent employee. Employees who have a contract of less than 3 months may not have automatic membership but can join the scheme by opting in. Please check your contract of employment to be sure.
If you wish to opt in, an application form is available on our ‘Forms and Resources’ page.
What do I receive?
The Local Government Pension Scheme is a career average scheme, which means your benefits are based on the pay you earn in each individual year.
You will receive a pension of 1/49th of your pensionable pay, for each year of membership. Ath the end of each year, your pension is adjusted to take into account the cost of living. The same thing then happens for each year of membership.
Pensionable Pay for the year / 49 + cost of living adjustment
You will also have the option of giving up some pension to provide a tax free lump sum. You can convert £1 of pension into £12 of lump sum, up to 25% of the capital value of your pension benefits.
How much does it cost?
Your employer will determine the contribution rate you pay based on your earnings and may change this during the year, if your pay changes significantly. If you have more than one job, you will pay a different contribution rate depending on your earnings in each job.
The pay bandings are reviewed annually and may change in line with the cost of living.
The contribution rates for 2018/19 are:
|Actual pensionable pay for an employment||Contribution rate for that employment|
|Main section||50/50 section|
|Up to £14,100||5.50%||2.75%|
|£14,101 to £22,000||5.80%||2.90%|
|£22,001 to £35,700||6.50%||3.25%|
|£35,701 to £45,200||6.80%||3.40%|
|£45,201 to £63,100||8.50%||4.25%|
|£63,101 to £89,400||9.90%||4.95%|
|£89,401 to £105,200||10.50%||5.25%|
|£105,201 to £157,800||11.40%||5.70%|
|£157,801 or more||12.50%||6.25%|
The Pension Contributions Calculator on the national LGPS member website can also help you to work out what contributions you would pay. Just click this link: Pensions Contributions Calculator
What if I change my mind?
You can stop paying into your pension at any time. However, as well as no longer growing your pension, you will also end the valuable protection for your family that being a member provides. You also lose tax relief on the earnings you were paying into your pension so your tax payments will increase.
Instead of leaving the LGPS completely, you could choose to move to the 50/50 section of the scheme. The 50/50 section allows you to pay half of your usual pension contributions and get half the pension benefits. You still get full protection for your family even though you’re paying half contributions.
You can elect to be in the 50/50 section at any time whilst a member of the LGPS and switch between the two sections as often as you choose. The 50/50 section joining form is available on our ‘Forms and Resources’ page.
If you still wish to stop paying into your pension, you may wish to take independent financial advice before making your decision.
If you opt out with 2 or more years membership you will be entitled to either an award of deferred benefits, payable from your retirement age, or a transfer to another pension arrangement. You would not be entitled to a refund.
Please note that you can only opt out once you have been enrolled into the scheme. Should you wish to opt out you will need to complete an Opt Out Form which is available from our 'Forms and Resources' .