Introduction to the LGPS
By understanding what your pension is and how it works, you will be ready to make the important decisions that may help you and your family when you retire.
With 4.6 million members, the Local Government Pension Scheme is one of the largest public sector pension schemes in the UK, and is a valuable part of the pay and reward package for employees working for employers participating in the scheme and for some councillors.
Who administers the scheme?
The Scheme is administered locally for participating employers through 90+ regional pension funds (one of which is the Clwyd Pension Fund).
Once you begin to contribute in the scheme you shall be accruing a pensionable benefit which will provide you with a source of regular income when you retire. This pension is an annual amount, paid to you on a monthly basis for the rest of your life; inflation is also added to your pension every year so it keeps up with the cost of living.
Defined Benefit Scheme
The Local Government Pension Scheme is a defined benefit scheme, which usually provides a pension income based on:
- the length of the pensionable service
- your pensionable pay
- the formula or rate of ‘accrual’ which uses service and pay to calculate your pension
- annual inflation (CPI) rates to determine the annual increases of all post 2014 pension benefits
- the circumstances under which benefits are taken from the scheme (retirement, redundancy, ill-health, death etc).
Who looks after the scheme?
The scheme is run by trustees who look after the interests of the scheme’s members. Your employer contributes to the scheme and is responsible for ensuring there is enough money at the time you retire to pay your pension.
Your pension isn’t determined by the performance of investments, stock markets and cost of annuities. Schemes which rely on investments are known as Defined Contribution (DC) schemes, where you pay in to a fund and when you retire what you’ve paid buys an annuity which will pay you a pension – this is not how the LGPS works.
You are in a defined benefit scheme, guaranteed by the government and does not rely on investments in the stock market it is a “funded” scheme and is invested in a number of ways to increase its value, however, it is safe and guaranteed to be paid when you retire, rather than you having to look for an annuity or other arrangement to pay your pension.
On top of your Local Government Pension Scheme pension you may also receive a state pension from the government when you retire. The Basic State Pension is based on the National Insurance contributions you pay, or which are given as credits, during your working life.