Pensions Update

Local Government Pension Scheme – Changes from 1 April 2008

On 1st April this year the new Local Government Pension Scheme will take effect with a new set of benefits for members. Despite the impending start, there are still some areas that are not in an implementable state so this overview outlines the areas where there is clarity. All your pension earned up to 1st April will be paid in line with the old 1997 scheme rules (1/80 pension plus 3/80 lump sum). Benefits earned in the new scheme will then be added to this to form your total LGPS pension on retirement.

Contribution Bandings

Employee contributions will be set according to bands of full time equivalent pay. The contribution rates for scheme members will vary between 5.5% and 7.5%.

Band Pay Range Cont Rate
1 £0-£12000 5.5%
2 £12001-£14000 5.8%
3 £14001-£18000 5.9%
4 £18001-£30000 6.5%
5 £30001-£40000 6.8%
6 £40001-£75000 7.2%
7 £75000 + 7.5%


Pension Calculation
For all service from 1st April 2008, your pension at Normal Retirement Age will be based on this formula:

Length of service × Final Pensionable Pay ÷ 60 = Annual Pension

Lump Sum
There is no automatic lump sum but you can trade up to around 25% of your pension for a lump sum at a rate of £12 cash for every £1 annual pension given up.

Retirement Age
The Normal Retirement Age of the scheme is 65, however, you can retire before or after that age. Usually your pension would be reduced for early payment (see below) or increased for late payment.

Final Pensionable Pay
Normally final pensionable pay will be your pensionable salary in your last year of service. If your pensionable salary was higher in either of the two years before that then the highest salary will be used. If you have reduced your hours or grade then the figure may be the highest consecutive three year average pensionable salary in the ten years before retirement.





Flexible Retirement
If you reduce your hours or grade in the run up to retirement and your employer agrees, you can take flexible retirement. This allows you to take some or all of your pension and continue working until you wish to retire fully when you’d take the remainder of your benefits.

Early Retirement – Voluntary
Despite the removal of the Rule of 85 you can still choose to retire before 65. You need your employer’s consent if retiring before 60 but not if you are over that age. Your pension will be reduced on the grounds that it is being paid early. For a man retiring at 60 the reduction is 24% and for a woman 23%. If you were a member before October 2006 and would have been able to retire early under the Rule of 85 you may qualify for some transitional protection that limits the amount your pension is reduced for early payment.

Early Retirement – Redundancy/Efficiency
If you leave employment on the grounds of redundancy or in the interest of the efficiency of the service and you are over 55 (50 for members of the old scheme up to April 2010), then you are entitled to the immediate payment of your pension, unreduced for early payment.

Survivors’ Benefits
If you die in service, your dependent should be in line for a death in service lump sum of three times your salary. If you die within ten years of retiring then your dependent should receive a lump sum of the balance of ten years’ of pension less any already paid to the member. A similar rule applies to deferred members although it is the balance of five years’ pension paid in that case. Survivors’ pensions are also payable to spouses, civil partners and/or children.

Additional Pension
You can make additional pension savings either through AVCs or by purchasing additional pension directly. You can buy up to £5,000 per year additional pension in blocks of £250 which would then be added to your annual pension when you retire.

Ill Health Pension
There are new ill health arrangements in the new LGPS 2008 and enhancements will be awarded according to likelihood of obtaining gainful employment after retirement.