How does the Local Government Pension Scheme (LGPS) work?

Full answer

The Local Government Pension Scheme (LGPS) is one of the largest public sector pension schemes in the UK, covering council employees, school support staff, and workers at many other local government-linked employers such as housing associations and academies. **Career average, not final salary** Since April 2014, the LGPS has been a career average revalued earnings (CARE) scheme rather than a final salary scheme. Each year you work, you build up a pension equal to 1/49th of your pensionable pay for that year, which is added to a running total. Each year's build-up is then revalued in line with the Consumer Prices Index (CPI) every April until you draw your pension, protecting it against inflation. **Contribution bands** Your employee contribution rate depends on how much you earn, ranging from around 5.5% for the lowest earners up to around 12.5% for higher earners, with rates reviewed periodically. Contributions are deducted before tax, so you automatically get tax relief at your marginal rate through the net pay arrangement used by most LGPS employers. **Normal pension age** Your LGPS Normal Pension Age is linked to your State Pension age (with a minimum of 65), and taking benefits before this age results in an early retirement reduction, while taking them after increases your pension through late retirement factors. **Lump sum options** Unlike many older public sector schemes, the LGPS does not provide an automatic separate lump sum -- instead, you can choose to give up some of your annual pension to take a tax-free lump sum, at a commutation rate of £12 of lump sum for every £1 of annual pension given up, up to a maximum of 25% of the total capital value (subject to the Lump Sum Allowance). **Death benefits and dependants** If you die in service, the LGPS pays a lump sum death grant of three times your annual pensionable pay, plus a survivor's pension to a spouse, civil partner, or eligible cohabiting partner and dependent children. **53rd week and multiple employers** Because many local government workers have more than one job (for example, school support staff working term-time only), the LGPS tracks each employment separately, and you can build up multiple LGPS pension pots simultaneously if you have several LGPS-eligible jobs. **Practical tip** Check your annual benefit statement each year to track your accrued pension, and consider the 50/50 section (paying half contributions for half the pension build-up, useful during temporary financial hardship) if full contributions are unaffordable, rather than opting out entirely and losing employer contributions altogether.

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