How is my pension worked out?

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How much pension you build up in the LGPS is based on your pay. The pension you build up each year is added to your pension account. If you joined the LGPS before 1 April 2014, you have membership in the final salary scheme. Your final salary benefits are worked out differently.
 
 

Your pension account

 
1/49th of your pensionable pay is put into your pension account every year. Assumed pensionable pay is used if your pay has been reduced for certain reasons. The balance in your pension account at the end of each year is adjusted in the following April in line with the cost of living. If you have more than one job you will have a separate pension account for each employment.
 
Let’s look at the pension account of a member who joined the Scheme on 1 April 2014. The member had pensionable pay of £24,500 in the first year and a pay rise of 1% in the next two years.
 

Pension account – an example
Year Opening Balance Pension built up in that year Total
at 31 March		 Cost of Living Updated
Total Amount
2014/15
£0
£24,500/49 = £500.00
£500.00
£6.00 (1.2%)
£506.00
2015/16
£506.00
£24,745/49 = £505.00
£1,011.00
£-1.01 (-0.1%)
£1,099.99
2016/17
£1,099.99
£24,992.45/49 = £510.05
£1,520.04
£15.20 (1%)
£1,535.24
 
The member’s pension account will continue to build up in the same way every year. 
 
If you are buying extra pension by paying Additional Pension Contributions or Shared Cost Additional Pension Contributions, the amount you buy in each year is added to your pension account.
 
If you join the 50/50 section of the LGPS, you would pay half your normal contributions for half the normal pension build-up. Each year you are in the 50/50 section 1/98th of your pay is put into your pension account instead of 1/49th. See the Paying less contributions section for more information about the 50/50 section.
 
 

How benefits built up before April 2014 are worked out

 
The LGPS changed from a final salary scheme to a career average scheme on 1 April 2014. If you joined the Scheme before 1 April 2014, you have built up benefits in the final salary scheme.
 
For membership built up between 1 April 2008 and 31 March 2014 you receive a pension of 1/60th of your final pay as a pension.
 
For membership before 1 April 2008, you receive a pension of 1/80th of your final pay plus an automatic lump sum of three times your pension.
 
Your final pay is usually your pensionable pay in the year you leave the Scheme. Pay from one of the previous two years can be used if it is higher.
 

How membership is worked out

If you worked part time before 1 April 2014, your membership is reduced accordingly. If you worked 17.5 hours per week and the whole time hours for your job were 35 per week, your membership would be reduced by 17.5/35, which is half. You would be credited with one year of membership every two years. Your membership may also be reduced if you work less than 52 weeks per year.
 
If you are working part time in your final year, the final pay used to work out your pension is the pay you would have received if you worked whole time.
 
Your total membership in the final salary scheme may include:
 
  • how long you were a member of the LGPS before 1 April 2014 in years and days, reduced for any period that you worked part time
  • membership that was bought by transferring pension benefits from another scheme before 1 April 2014
  • membership that was bought by transferring final salary benefits from another public service pension scheme at any time
  • extra membership you have bought by paying added years contributions or by converting an in-house AVC into membership
  • extra membership awarded by your employer.
 

Example of final salary benefits

Let’s look at the final salary benefits built up by a member who:
 
  • joined the LGPS on 1 April 2001
  • worked full time throughout and has seven years membership before 1 April 2008 and six years membership between 1 April 2008 and 31 March 2014
  • leaves the LGPS on 31 March 2018
  • has final pay of £28,000, based on the period from 1 April 2017 to 31 March 2018.
 
For the period 1 April 2008 to 31 March 2014:
Annual pension: 6/60th x £28,000 = £2,800
 
For the period 1 April 2001 to 31 March 2008:
Annual pension: 7/80ths x £28,000 = £2,450
Plus a tax-free lump sum: 3 x 7/80ths x £28,000 = £7,350
 
The total annual pension would be £5,250, plus the value of pension built up in the pension account since 1 April 2014.
 
As the member in this example joined the LGPS before 1 April 2008, they will automatically receive a tax-free lump sum when they take their pension.
 
Most members will be able to give up part of their annual pension in exchange for a tax-free lump sum. For every £1 of annual pension you give up you get £12 of lump sum. HM Revenue and Customs set a limit on how much you can receive tax-free.
 
Use the Lump sum calculator to find out more about this option.
 
 

Protections if your pay is reduced

 
If your pay reduces, this could reduce the value of your final salary benefits. There are protections in place to protect you if this happens. In certain circumstances, you can choose to have your final pay calculated as the average of any three consecutive years ending on 31 March. You will have this option if:
 
  • your pay reduces because you move to a job with less responsibility
  • your pay reduces as a result of a job evaluation exercise or equal pay exercise
  • your pay reduces because the pensionable pay specified in your contract changes – based on the definition of pensionable pay before 1 April 2014, and
  • that pay reduction happens less than ten years before you leave the LGPS.
 
You will have the same protection if your pay is not reduced, but the increases to your pay are restricted.
 
You cannot make use of this protection if your pay is reduced at the end of a period when your pay was temporarily increased. You also cannot use this protection if your pay reduced when you took flexible retirement.
 
You must tell us that you want to take up this option at least one month before you leave the LGPS.
 
Members whose pay reduced before 1 April 2008 may have been given a certificate of protection. This offered similar protection in a similar way. Certificates of protection do not protect members leaving the Scheme now because more than 10 years have passed since the pay reduction.
 
 

The McCloud remedy for active members

If you first joined the LGPS or another public service pension scheme before 1 April 2012, the pension you built up between 1 April 2014 and 31 March 2022 – the remedy period – may be protected by the McCloud remedy.
 
If it is, we will check whether the pension you built up in the remedy period would have been higher in the final salary scheme when you take your pension. If it would have been, your pension will increase.