How is my pension calculated?
Upon joining the LGPS, you will have a pension account in the scheme. For each year that you are paying into the scheme, you will build up a pension based on your pensionable pay in that year. For each year that you are a member, a pension equal to a 49th of your pensionable pay will be added to your pension account. Inflation will be applied to ensure that your pension account keeps up with the cost of living.
This benefit structure has been in place since April 2014.
For pension accrued before 31 March 2008, the proportion is an 80th of your whole-time equivalent pay.
Plus, an automatic lump sum of 3 times your pension. Your final pay is usually the pensionable pay earned in the year prior to leaving the scheme.
You can choose to give up some of your pension for a bigger lump sum.
If you have membership both before and after 1 April 2008 the two amounts of pension and tax-free lump sum will then be added together to give you your total benefits.
For any pension built up after 1 April 2008, it is an improved 60th rate.
For pension benefits built up before 31 March 2014, you get a proportion of your pay for every year and the days that you are a member of the scheme.
If you joined the Scheme for the first time on or after 1 April 2008 (but before 1 April 2014), your benefits are worked out as:
You can take part of your pension as a tax-free lump sum, but you will have to give up some of your pension for this.
However, from 1 April 2014 that formula is different because the Scheme changed from a final salary scheme to a career average scheme:
For each year in the new scheme, you will build up a pension based on your actual pensionable pay in that year.
For each scheme year that you are a member after 1 April 2014, a pension equal to a 49th of your pensionable pay will be added to your pension account.
For each year that passes, the amount of pension that is building up is revalued in line with inflation. This could be an increase or a decrease, depending on the Consumer Prices Index.
From the 1 April 2014, members have had the option of joining the 50/50 section of the Scheme.
In the 50/50 section, benefits are based on 1/98th of a member's pensionable pay, for each year of membership in this section of the Scheme.
The benefits are still adjusted at the end of the year to consider the cost of living.
Regarding any benefits that you have built up before 1 April 2014
As might be expected, a member working part time will receive comparatively lower benefits than a colleague working full time. This is because one of the factors used in calculating the pension benefits is the amount of service a member builds up in the scheme.
As an example, an employee who works half time for a year would be credited with a period of six months for pension purposes whereas an employee working whole-time would count the whole year. They would, of course, only pay half the pension contributions of someone working whole time.
But, and this is the important aspect to remember, in the case of an employee working part time, the pay figure used is always that of a whole-time employee. This ensures a fair way of working out pension benefits for all.
Regarding any benefits that you have built up after April 2014
The pension benefits of each member are based on their actual pensionable pay. Therefore, everybody gets a benefit related to the level of their income for every year that they are in the pension scheme.
Members who reduce their hours during their working lifetime can be assured that such a change would only affect the build-up of their pension benefits going forward and does not affect anything that they have already paid for.