- Thinking of joining
Thinking of joining
This information is applicable to the LGPS Scheme only and not the Councillor Scheme.
About the Local Government Pension Scheme
The Local Government Pension Scheme (LGPS) is a defined benefit scheme. This means that the value of your LGPS pension at retirement is not calculated based on the performance of investments, stock markets and cost of annuities. Instead, your pension value is calculated based on details such as; how long you have been paying pension contributions for, your pensionable salary amount, and a pension build-up rate of 1/49th of the salary you have paid pension contributions on.
It is also a funded scheme which means that it is invested in a number of ways to increase the Fund’s value and to make sure your benefits are guaranteed to be paid at retirement.
LGPS is one of the largest public sector pension schemes in the UK. It is a nationwide pension scheme for people working in local government or working for other employers participating in LGPS. The LGPS in England and Wales is administered locally through 89 local pension funds, one of which being the Clwyd Pension Fund. In 2021, there were approximately 6.1 million members of LGPS nationwide, being a valuable part of the pay and reward package for employees working for employers participating in the scheme.
Once you begin to contribute into the scheme you will start to build up a pension 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 increases with the cost of living.
Pension build up in the Local Government Pension Scheme
If you decide to join LGPS now, you will build up an annual pension based on a Career Average Revalued Earnings (CARE) scheme. This means that your pension will build up based on your pensionable pay for each year that you pay pension contributions. Pensionable pay is any pay that you have earned and paid pension contributions on.
A pension scheme year runs from 1st April to 31st March. Each scheme year, your annual pension under the CARE scheme is worked out as follows:
Pensionable pay for each scheme year ÷ 49 + cost of inflation
£25,000 pensionable pay ÷ 49 = £510.20 + cost of inflation
The example above is based on you paying full rate pension contributions. You also have an option to pay half rate pension contributions. This is called our 50:50 scheme. If you decide to join the 50:50 scheme, you pay half the contributions that you would pay in the main scheme and the pension builds up at half the rate of the main scheme pension:
Pensionable pay for each scheme year ÷ 98 + cost of inflation
£25,000 pensionable pay ÷ 98 = £255.10 + cost of inflation
Each year, inflation increases are added to your pension value to ensure that the pension you are building up is kept in line with cost of living. The table below shows an example of how this is done.
|Scheme Year||Actual Pens Pay||Build Up Rate||CARE Pension||Accumulative CARE Pension||Cost of Living Increase||CARE Pension after inflation|
|01/04/2014 – 31/03/2015||£24,500||49||£500||£500.00||1.20%||£506.00|
|01/04/2015 – 31/03/2016||£25,000||49||£510||£1,016.00||-0.10%||£1,014.98|
|01/04/2016 – 31/03/2017||£25,500||49||£520||£1,534.98||1.00%||£1,550.33|
|01/04/2017 – 31/03/2018||£26,000||49||£530||£2,080.33||3.00%||£2,142.74|
|01/04/2018 – 31/03/2019||£26,500||49||£540||£2,682.74||2.40%||£2,747.13|
|01/04/2019 – 31/03/2020||£27,000||49||£551||£3,298.13||1.70%||£3,354.20|
|01/04/2020 – 31/03/2021||£27,500||49||£561||£3,915.20||0.50%||£3,934.78|
|01/04/2021 – 31/03/2022||£28,000||49||£571.43||£4,506.21||3.10%||£4,645.90|
|Total CARE Pension||£4,645.90|
If you have an absence from work which means you are on reduced pay or no pay, depending on the reason for the absence, your pension may be calculated using an assumed pensionable pay. Assumed pensionable pay is the pay you would have earned if the absence had not happened.
When you retire, you can convert some of your annual pension into a tax free lump sum. For every £1 of annual pension you wish to convert, you will gain £12 tax free lump sum. You can take up to 25% of the capital value of your LGPS benefits as a tax free lump sum.
Giving up £50 annual pension will give you £600 tax free lump sum
£50 x 12 = £600 tax free lump sum
When you have been enrolled into LGPS, you have the option to pay full pension contributions to build up a full pension (main scheme), or pay half the contributions to build up half the pension amount (50:50 scheme). However, your employer will enrol you into the main scheme option unless you state otherwise.
LGPS regulations state that your pension contribution is determined by the amount of your actual gross pensionable pay. Your employer reviews the employee contribution table shown below to work out which percentage rate is correct for you. The table includes both main scheme and 50:50 scheme contribution rates.
The rates for 1st April 2022 to 31st March 2023 are:
|Your Actual Pensionable Pay||Contribution Rate for the Main Section||Contribution Rate for the 50/50 Section|
|Up to £15,000||5.50%||2.75%|
|£15,001 to £23,600||5.80%||2.90%|
|£23,601 to £38,300||6.50%||3.25%|
|£38,301 to £48,500||6.80%||3.40%|
|£48,501 to £67,900||8.50%||4.25%|
|£67,901 to £96,200||9.90%||4.95%|
|£96,201 to £113,400||10.50%||5.25%|
|£113,401 to £170,100||11.40%||5.70%|
|More than £170,101||12.50%||6.25%|
If you decide to join the 50:50 scheme, your employer has to re-enrol you into the main scheme after 3 years. However, you can opt for 50:50 again if you so wish by completing a 50:50 form. Please note that you can only join the 50:50 scheme after you have been brought into the default main scheme. If you join the 50:50 scheme, you can move back to the main scheme at any point by completing a main scheme form.
Your employer is responsible for deducting the correct contributions from you. The employee contribution table is updated each April and provided to your employer so they can make sure they are deducting the correct contributions.
LGPS is a defined benefit pension scheme. This means that your pension contributions are not used to buy an annuity pension at retirement. Buying annuity pensions with contributions is generally done by defined contribution pension schemes.
Your contributions and your pension in the LGPS are not linked. Often people think that their contributions are their pension. But employee and employer contributions are a contribution towards the cost of the pension scheme. This ensures that you have that guarantee of a pension when you retire.
Your employer contributes into the scheme as well as you. The employer’s contribution rate is reviewed every 3 years by the Clwyd Pension Fund’s Actuary, so your employer does not decide their own contribution rate.
Whether you pay contributions in main scheme or 50:50 scheme, you will have full death in service cover and be protected for a full ill-health retirement pension.
Reasons to Join
Ten benefits of being an LGPS member:
- Pension contributions are deducted from your pay before tax so you receive tax relief
- No hidden charges or administration fees
- Your employer contributes too
- Option for you to pay extra pension contributions to increase your annual pension or lump sum amount at retirement
- You can retire between the ages of 55 and 75
- Ill health protections at any age
- Annual pension payable for life when you retire and it increases in line with cost of living each April
- Option to create a tax free lump sum at retirement
- Death Grant to be paid to your loved ones
- Survivors’ pensions payable to spouse/partner and any eligible children
How to Join
For you to be eligible to join, your employer must use LGPS as their occupational pension scheme. Some employers have to use LGPS by law. These employers can include:
- Local Authorities,
- Schools, colleges, and universities (for non-teaching staff)
- Fire Civilians
Other employers such as Town and Community Councils can request to be part of the Clwyd Pension Fund so that they can offer LGPS to their employees. Employers who may be Limited companies but who offer public sector services and who employ former public sector employees (TUPE transfers), can request to be admitted into the Clwyd Pension Fund too via a contract called an admission agreement.
If you are employed by such an employer, you can only join if your employer nominates you for membership of the scheme.
Your employer will let you know if you are eligible to become an LGPS member or not. If you are eligible, you will fall into one of the following categories:
Contractually enrolled into LGPS:
An employee with a contract of 3 months or more, and under the age of 75: your employer will enrol you into the LGPS without you needing to complete an opt-in form.
Opt in to LGPS:
If you have not been contractually enrolled into LGPS because you are an employee with a contract of less than 3 months, and are under the age of 75: you may have a choice to opt into the scheme if LGPS has been made available to you. You also have an option to opt back in if you have previously opted out.
If you do have the choice to opt in, you can complete an opt-in form and return it to your employer’s payroll department. Your employer will start to deduct the pension contributions from your pay at the earliest opportunity. The deductions will continue to be made from your pay each payday after that.
Please remember to check your payslip each month to make sure that your employer is deducting pension contributions from your pay.
Once you have joined the LGPS, your employer will inform the Clwyd Pension Fund so that we can create a pension record for you. You will have a pension record for each job you are paying LGPS contributions on and you will receive a welcome letter including some forms for you to complete, along with an activation key for you to register for Member Self-Service (your online pension account).
Automatic enrolment was put in place by the Government to help people save for retirement through their pension scheme at work. It requires employers to automatically enrol their eligible workers into the pension scheme and to contribute to it.
For the purposes of auto-enrolment, employers must enrol you into their occupational pension scheme if:
- You are not already in a qualifying workplace pension scheme (LGPS is classed as a qualifying workplace pension scheme AND can be used for auto-enrolment)
- You are at least 22 years old
- You are below State Pension Age
- You earn more than £10,000 a year
- You work or ordinarily work in the UK (under your employment contract)
Even if you do not fit the above criteria, you may still be able to opt into the LGPS.