Pensions Increase and the link with the State Scheme

Benefits payable under the LGPS are in addition to any pension paid from the State Scheme.  The State Pension consists of two elements – the Basic State Pension and the State’s Additional Pension which is known as the State Second Pension (S2P) – previously called the State Earnings Related Pension Scheme (SERPS).

As a member of the LGPS, you are contracted out of the State’s Additional Pension and at State Pension Age, the Scheme must guarantee to provide you with a pension that is at least equal to the pension you would have had from the State had you not been contracted out.

Up to State Pension Age, the increase on your LGPS pension is paid by the Pension Fund, however, from State Pension Age, some of your increase may be payable by the Department of Work and  Pensions (DWP) as shown in the example below. 

If your pension is based on all or some service between 6 April 1978 and 5 April 1997, you may have built up a Guaranteed Minimum Pension (GMP) which is generally equivalent to the amount you would have had if you had been in the additional State Earnings Related Pension Scheme (SERPS) for that period. 

The increases on the GMP part of your pension are paid by the Department for Work and Pensions (DWP), although the LGPS is responsible for increases up to 3% on any GMP earned from 6 April 1988. 

Example

Scheme Member retires at State Pension Age on 31 March 2012.

Pension in payment = £4,800 p.a. /£400 p.m.

Total GMP = £208 p.a. (includes  a GMP of £52 p.a. in respect of service from 6 April 1988 to 5 April 1997).

Pension Increase with effect 8 April 2013 

 

              £

Current Annual Pension

4,800.00

Less Total GMP

208.00

 

4,592.00

2.2% Pensions Increase

+ 101.02

2.2% Pensions Increase on Post ‘88 GMP of £52.00     

+ 1.04

 

4,694.06

Add back Total GMP

+ 208.00

New Annual Pension with effect from 8 April 2013

£4902.06

 

£408.51p.m.