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- Working out your deferred councillor pension
Working out your deferred councillor pension
You need to have paid pension contributions for three months or more to have a deferred pension benefit in the Local Government Pension Scheme, or LGPS Councillor.
LGPS Councillor is a defined benefit pension scheme. This means that the value of your deferred pension is not based on the pension contributions you paid.
Your pension benefits are based on:
- A build-up rate of 1/80,
- Your career average pay, and
- Your total membership in LGPS Councillor
In this example, the councillor was a member of LGPS Councillor for 5 years. Their career average pay is based on all of the fees or pay they paid pension contributions on, as well as cost of living increases, in line with an inflation measure called the Retail Price Index, or RPI.
The amount of membership is the time from when you started paying pension contributions to when you stopped.
Example
| Year 1 Earnings £9,400 | x cost of living increase 1.12 | = £10,528 |
| Year 2 Earnings £9,600 | x cost of living increase 1.08 | = £10,368 |
| Year 3 Earnings £9,900 | x cost of living increase 1.05 | = £10,395 |
| Year 4 Earnings £10,400 | x cost of living increase 1.02 | = £10,608 |
| Year 5 Earnings £11,000 | x cost of living increase 1.00 | = £11,000 |
| Accumulative Total | = £52,899 | |
| Career Average Pay (£52,899 ÷ 5 Years) |
= £10,579.80 |
Once we have figures for career average pay and membership, we can work out the value of the deferred pension:
| Annual pension
Years and days membership ÷ 80 x career average pay One off tax-free lump sum 1/80 annual pension x 3 |
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Example
Annual pension 5 years ÷ 80 x £10,579.80 = £661.24 of 1/80 annual pension One off tax-free lump sum £661.24 x 3 = £1,983.72 |
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Your annual allowance is the amount the value of your pension benefits can grow in a tax year without you having to pay a tax charge. If the value of your pension savings from 6th April to 5th April is more than your annual allowance, the excess will be taxed as income.
For more details about annual allowance, please click here.