Pillar Guide · Updated July 2026
Local Government Pension Scheme (LGPS): A Complete Guide for 2026/27
The LGPS covers around 6 million council, school-support and admitted-body employees across England and Wales, making it one of the largest funded pension schemes in Europe. This guide explains how the career average revalued earnings (CARE) structure works, the 2026/27 contribution bands, the 1/49th accrual rate, the McCloud remedy recalculation, transferring benefits in or out, taking early or late retirement, and how the Annual Allowance interacts with defined benefit growth.
What Is the LGPS
The Local Government Pension Scheme is a statutory, funded, defined benefit pension scheme for employees of local authorities, academy schools, and a wide range of “admitted bodies” such as leisure trusts, housing associations and outsourced service providers that have been granted admission to a local LGPS fund. Unlike the NHS Pension Scheme or Teachers’ Pension Scheme, which are unfunded and paid from current taxation, the LGPS is funded — each of the roughly 86 local LGPS funds in England and Wales invests contributions in stocks, bonds, property and other assets to meet future pension payments.
Scotland and Northern Ireland run separate LGPS funds with broadly similar CARE structures but different specific rates and rules, and are not covered in detail in this guide. Membership is automatic for eligible employees through pension auto-enrolment, and most local government workers who do not actively opt out remain members throughout their employment.
Contribution Bands 2026/27
Unlike many pension schemes with a single flat contribution rate, the LGPS uses a banded structure so that lower earners pay a smaller percentage of pay than higher earners. For 2026/27, indicative bands (uprated annually by CPI) run approximately as follows: 5.5% up to roughly £17,800 of pensionable pay; 5.8% from £17,800 to £27,600; 6.5% from £27,600 to £44,900; 6.8% from £44,900 to £56,800; 8.5% from £56,800 to £79,700; 9.9% from £79,700 to £112,900; 10.5% from £112,900 to £132,900; 11.4% from £132,900 to £199,300; and 12.5% above £199,300.
Employers contribute considerably more — typically 19-22% of pensionable pay, though the precise rate depends on each local fund’s triennial actuarial valuation and the employer’s specific funding position. Some employers pay lower or higher rates depending on their fund’s deficit or surplus. This makes the overall value of LGPS membership substantially higher than the employee contribution alone suggests.
CARE Benefit Structure and Accrual
Since 1 April 2014 the LGPS in England and Wales has built benefits on a career average revalued earnings basis. In each scheme year, 1/49th of your pensionable pay for that year is credited to your pension account. That amount is then revalued each subsequent April broadly in line with the Consumer Prices Index, so the value keeps pace with inflation until you retire and draw your pension.
Members who joined before April 2014 also have a final salary component for service up to that date, calculated using the older 1/60th (or in some cases 1/80th plus lump sum) accrual rate applied to their final salary at retirement or leaving — not their pay in 2014. This creates a two-part pension for long-serving members: a final-salary linked benefit for pre-2014 service and a CARE benefit for post-2014 service, added together at retirement.
The 1/49th accrual rate is notably more generous than the 1/60th used by many private sector career average schemes, reflecting the LGPS’s status as one of the better-value public sector pensions. Part-time employees accrue pension on their actual part-time pensionable pay, not a full-time equivalent, so working reduced hours proportionately reduces the pension built up in that year.
The McCloud Remedy
When public sector pensions moved to CARE structures around 2014-2015, transitional protection allowed older members close to retirement to remain in their legacy final salary arrangement for longer. Younger members were moved to CARE immediately. The Court of Appeal ruled in the McCloud and Sargeant cases that this transitional protection was unlawfully discriminatory on age grounds, because it disadvantaged younger members purely because of their age.
The Public Service Pensions and Judicial Offices Act 2022 requires every public service pension scheme, including the LGPS, to remedy this discrimination for all members with relevant service between 1 April 2014 and 31 March 2022 (the “remedy period”). For the LGPS this takes the form of an “underpin” — the fund automatically compares the pension you would have built up in the legacy final salary scheme against the CARE benefit for the remedy period, and pays whichever produces the better outcome, regardless of your age at the time.
Most funds have now completed the bulk recalculation exercise, but members who retired, transferred out, or died during or shortly after the remedy period may need to actively request a recalculated benefit statement if they have not already received one. Where the underpin produces a higher benefit, any arrears are paid with interest; if you were undercharged contributions as a result of the change, a repayment arrangement is agreed with the fund.
Taking Your Pension: Normal, Early and Late
Your LGPS Normal Pension Age for CARE benefits built up since April 2014 is linked to your State Pension age, with a minimum of 66. Pre-2014 final salary benefits generally retain a Normal Pension Age of 65. You can draw your pension in full, without any actuarial reduction, once you reach the relevant Normal Pension Age and have left local government employment (or, in some funds, while still working under flexible retirement arrangements agreed with your employer).
Taking your pension from age 55 (rising to 57 from 2028) is possible but usually triggers an actuarial reduction to reflect the longer payment period — broadly around 4-5% reduction per year taken early, though the exact percentage depends on how many years before Normal Pension Age you draw benefits. Members with sufficient age-plus-membership under the “Rule of 85” may have some or all of this reduction protected for pre-2016 service, a valuable but complex legacy protection that a fund administrator can confirm on request.
Deferring beyond Normal Pension Age (while still working, or after leaving) increases the pension through a late retirement factor, since it will be paid for fewer years on average. Flexible retirement — reducing hours or grade and drawing some or all of your pension from age 55 while continuing to work for the same employer — is available at employer discretion and can be a useful way to wind down a career gradually.
Leaving the Scheme: Deferred Benefits and Transfers
If you leave local government employment (or opt out) with at least two years’ qualifying service, your benefits become deferred — preserved in the scheme and revalued each April in line with CPI until you choose to draw them, normally from age 55 at the earliest, subject to reduction, or without reduction from Normal Pension Age.
With less than two years’ qualifying service and no transfer-in from a previous scheme, you can transfer the cash equivalent value to another registered pension scheme, or in limited cases take a refund of your own contributions less a deduction for tax and any state scheme contracting-out adjustment. Members moving between LGPS funds when changing council employer, or between the LGPS and another public service scheme within a defined window, can usually arrange a “club transfer” that protects final salary linkage rather than a standard cash equivalent transfer.
Tax-Free Lump Sum and Commutation
LGPS members can normally commute (give up) part of their annual pension in exchange for a tax-free lump sum, at the standard HMRC-set commutation rate of £12 lump sum for every £1 of annual pension surrendered, up to a maximum lump sum of 25% of the overall capital value of benefits. Members with pre-2008 service may also have an automatic lump sum built in as standard from that earlier scheme design, on top of any further commutation.
The overall tax-free lump sum across all your registered pensions is capped by the Lump Sum Allowance of £268,275 for 2026/27 (unless you hold protected, higher historic allowances). Any lump sum taken above the available allowance is taxed as pension income at your marginal rate rather than being tax-free.
Death Benefits
If you die while an active LGPS member, a lump sum death grant of three times your assumed annual pensionable pay is normally paid, together with an ongoing survivor pension for a spouse, civil partner or qualifying cohabiting partner, and separate pensions for eligible dependent children. If you die as a deferred member, the typical lump sum is five times your deferred annual pension, subject to a minimum underpin, plus survivor benefits calculated on your deferred pension.
If you die after your pension is already in payment, a ten-year pension guarantee usually applies — if fewer than ten years of payments have been made, the balance is paid as a lump sum to your estate or nominated beneficiaries, in addition to any survivor pension. Nominating beneficiaries through an expression of wish form (kept up to date, especially after marriage, divorce or the birth of children) ensures lump sum death grants are paid according to your actual wishes.
Boosting Your Pension: APCs and AVCs
Additional Pension Contributions (APCs) let you buy a fixed extra amount of annual LGPS pension, up to £8,344 a year for 2026/27 (uprated annually), paid either as a lump sum or by regular deduction from pay over an agreed period. A common use is a “Shared Cost APC”, where your employer agrees to meet two-thirds of the cost — frequently offered to restore pension lost during unpaid additional maternity, paternity, adoption or shared parental leave, or unpaid authorised absence such as strike action in some cases.
Additional Voluntary Contributions (AVCs) work differently — money is paid into a separate, in-house AVC arrangement with a linked provider (commonly Prudential or Standard Life, depending on the fund), invested in a range of funds you select, and available flexibly at retirement, including as additional tax-free cash within the overall Lump Sum Allowance. AVCs offer more investment choice and flexibility than APCs but carry investment risk, unlike the guaranteed extra pension an APC provides.
Annual Allowance and the LGPS
Because the LGPS is defined benefit, the amount tested against your £60,000 Annual Allowance for 2026/27 is not your contributions but the statutory “pension input amount” — broadly, the increase in the value of your annual pension over the tax year (multiplied by a factor of 16) plus any increase in automatic lump sum, after stripping out CPI revaluation of the opening value.
A significant pay rise, promotion, or a large pensionable bonus can therefore produce a much bigger pension input amount than your actual contributions would suggest, potentially triggering an Annual Allowance charge even for members who are not particularly high earners in a single year. Anyone who receives a substantial pay increase, or who is a high earner subject to the tapered Annual Allowance (reducing towards a floor of £10,000 for adjusted incomes above £260,000), should request a Pension Savings Statement from their LGPS fund and consider taking financial advice on Scheme Pays options, which allow the LGPS itself to settle an Annual Allowance tax charge in exchange for a permanent reduction to future pension.