A Guide to the Local Government Pension Scheme for Eligible Councillors in England and Wales

Introduction

The information in this booklet is based on the Local Government Pension Scheme (LGPS) Regulations 1997 and other relevant legislation. The booklet is for councillors in England or Wales and reflects the provisions of the LGPS and overriding legislation at the time of publication in May 2023. The Government may make changes to overriding legislation and, after consultation with interested parties, may make changes in the future to the LGPS.

Please note that the LGPS (Transitional Provisions, Savings and Amendment) Regulations 2014 amended access to the LGPS for councillors in England. From 1 April 2014, councillors in England are unable to join the LGPS. Those councillor members in England who were in the Scheme on 31 March 2014 could remain in the Scheme until the end of the term of office they were serving on that date. Councillors in England are not able to re-join the LGPS in any subsequent term of office.

Councillors in England should read the relevant section of the Councillor pensions page of the LGPS member website for the position from April 2014.

Councillors in Wales continue to have access to the LGPS from 1 April 2014.  

The booklet is for general use and cannot cover every personal circumstance. In the event of any dispute over your pension benefits, the appropriate legislation will prevail. This booklet does not confer any contractual or statutory rights and is provided for information purposes only.

The booklet explains the benefits offered by the Local Government Pension Scheme. It describes how the Scheme works, what it costs and the financial protection that it offers to you and your family.

Where pension terms are used, they appear in bold italic type. You can find definitions of those terms in the Pension terms defined section at the end of the booklet.

Your Pensions Choice

Taking your pension is a goal to look forward to. However, if your pension is to meet your expectations, you will need to plan now for your income in retirement.

Your retirement income, over and above the State Pension, will generally be provided by a personal pension plan, a stakeholder pension scheme or by an occupational pension scheme such as the Local Government Pension Scheme. These are described briefly below.

Personal pension plans and stakeholder pension schemes

Various institutions such as banks, building societies and life assurance companies provide and administer personal pensions and stakeholder pension schemes. Your chosen organisation invests your contributions. The investments are cashed in when you retire. The sum of money realised is used to buy retirement benefits from the insurance market. Since April 2015, the money realised can be taken as cash, subject to tax as appropriate. Your benefits are based on investment returns and are not guaranteed or linked to your earnings. The age from which you may receive them will vary according to the plan.

Local Government Pension Scheme

The Local Government Pension Scheme (LGPS) is a statutory, funded pension scheme. As such it is very secure because its benefits are defined and set out in law.

Highlights of the LGPS are:

Highlights of the LGPS Councillor include:

• a tax-free lump sum when you retire
• a pension based on your career average pay
• the ability to increase your pension by paying additional voluntary contributions
• voluntary retirement from age 55
• retirement from age 50 with your council’s consent
• an ill health pension from any age
• a death in service lump sum of two times career average pay
• a spouse’s or civil partner’s pension
• children’s pensions
• index-linked benefits to ensure that they keep pace with inflation.
• your contributions attract tax relief when they are deducted from your allowances.

Joining the LGPS

Who can join?

From 1 April 2014 the LGPS is not available to councillors or elected mayors of English county councils, district councils or London borough councils.

The LGPS is available to all councillors of Welsh county councils or county borough councils who are offered membership of the Scheme under the council’s scheme of allowances and who are under age 75.

Those Welsh councillors who are offered membership are eligible councillors. If you have been offered membership of the Scheme, it will be for you to decide whether to opt to join. If you make an election to do so, you will become a member of the LGPS from the beginning of the first pay period following the receipt of your option. You can read about special rules for previous optants out in the Opting out of the LGPS section).

How do I ensure that I have become a member of the LGPS?

To secure your entitlement to Scheme benefits, it is important that you complete and return the joining form if you wish to opt into membership of the Scheme. On receipt of your form, relevant records will be set up and an official notification of your membership of the Scheme will be sent to you. You should check your allowance payments to ensure that pension contributions are being deducted.

What if I already pay into a pension?

If you currently contribute to a personal pension plan or stakeholder pension scheme and decide to join the LGPS, you can continue to pay into the other pension arrangement. There are HM Revenue and Customs controls on the total amount of contributions you can make into all pension arrangements and receive tax relief. You can pay up to 100% of your UK taxable earnings in any one tax year into any number of pension arrangements of your choice (or, if greater, £3,600 to a ‘tax relief at source’ arrangement, such as a personal pension or stakeholder pension scheme) and be eligible for tax relief on those contributions.

The annual allowance limits the amount of pension savings you can have in a year before you become subject to a tax charge. Most scheme members’ pension savings will be less than the annual allowance.

I’m already receiving an LGPS pension – will it be affected?

If you become a councillor, you must tell the LGPS administering authority that pays your pension about your new position, regardless of whether you join the Scheme in your new position or not. They will then check to see whether the pension they are paying should be reduced.

Contributions

What do I pay?

Your contribution is currently 6% of the pay you receive.

Your contributions are very secure. As the LGPS is set up by Statute, payment of benefits to members is guaranteed by law.

What does the council pay?

The council pays the balance of the cost of providing your benefits after taking into account investment returns. Every three years, an independent actuary calculates how much the council should contribute to the Scheme. The amount will vary, but the present underlying assumption is that you contribute approximately one third of the Scheme’s costs and the council contributes the remainder.

Do I receive tax relief on my contributions?

The Scheme is fully approved by HM Revenue and Customs. If you earn enough to pay tax, you will receive tax relief on your contributions. To achieve this, your contributions are deducted from your allowances before you pay tax. So, for example, if you pay tax at the rate of 20%, every £1 that you contribute to the Scheme only costs you 80p net.

There are restrictions on the amount of tax relief available on pension contributions. If the value of your pension savings increases in any one year by more than the annual allowance you may have to pay a tax charge. Most people will not be affected by the annual allowance.

Can I make extra contributions to increase my benefits?

Members can increase their benefits by making additional voluntary contributions (AVCs). You may also pay contributions into a personal pension plan or a stakeholder pension scheme. These options are explained in more detail in the Increasing your benefits section.

Is there a limit to how much I can contribute?

There is no limit on the amount of contributions you can pay. There is a limit on the amount you can pay into the Scheme’s AVC arrangement. See the Increasing your benefits section. However, tax relief will only be given on contributions up to 100% of your UK taxable earnings (or, if greater, £3,600 to a ‘tax relief at source’ arrangement, such as a personal pension or stakeholder pension scheme).

The HM Revenue and Customs control known as the annual allowance limits the amount of pension savings you can have in a year before you have to pay a tax charge. Most scheme members’ pension savings will be less than the annual allowance.

Can I transfer pension rights into the LGPS?

The rules of the Scheme do not permit you to transfer pension rights into the LGPS from another pension scheme or from another LGPS administering authority.

Points to note on contributions

• If you have a deferred benefit from a previous period of councillor membership in the same LGPS administering authority, you may opt to join the earlier councillor membership with the current period of councillor membership. You must opt to do this within 12 months of re-joining the Scheme, or such longer period as your council allows. This is a council discretion; you can ask your council what their policy is on this.
• Pension rights built up as an employee in England or Wales cannot be joined with rights built up as a councillor or mayor in England or Wales and vice versa.

Retirement benefits

When can I retire?

You can retire and receive your LGPS benefits in full once you have attained age 65. The Scheme also allows you to take your benefits early. You can find out more in the sections on Ill health retirement and Early Retirement.

In addition to your LGPS benefits, you may also qualify for a state retirement pension paid by the Government from State Pension age.

A single tier, flat rate State Pension has been introduced for people who reached or will reach State Pension age on or after 6 April 2016. It replaces the basic and additional State Pension that is payable to people who reached State Pension age before 6 April 2016. You will be able to claim the new State Pension when you reach State Pension age if you’re:

• a man born on or after 6 April 1951
• a woman born on or after 6 April 1953

and, normally, have at least 10 qualifying years on your National Insurance record.

If you do not know what your State Pension age is, you can Check your State Pension age online.

If you are eligible for the new State Pension, you might not receive the full amount. This is because you are likely to have paid a lower amount of National Insurance in previous years as a member of the LGPS. You can find more information about this at www.gov.uk/contracted-out.

What are my retirement benefits?

When you retire, you will receive a pension and a tax-free lump sum from the LGPS. At State Pension age you will also receive a state retirement pension, if you have paid sufficient National Insurance contributions during your working life.

How much will my pension be?

Your LGPS pension is based on your total membership and your career average pay. The example below shows that your annual pension is calculated by dividing your career average pay into 80ths and multiplying this figure by your total membership.

How much will my lump sum be?

The lump sum automatically paid on retirement is three times your annual pension. It is based on your career average pay and your total membership. The calculation of the lump sum is 3/80ths of your career average pay for every year of total membership. When you take your benefits, you will be able to exchange some of your pension to receive a bigger lump sum. The lump sum will be paid tax-free to most members, but there is a limit on how much tax-free cash you can take from UK pension schemes. The limit is called the lump sum allowance and is generally £268,275. It may be higher if you hold protection from lifetime allowance tax charges. If you exceed the limit, you would pay tax on the excess at your marginal tax rate.

Further information on giving up some of your pension to increase your lump sum is provided in example 1.

Example 1:

Pension and lump sum calculation

On retirement at age 65 a Scheme member has:

Total membership of 10 years and 204 days and

Career average pay of £16,200

The annual pension is:

1/80 × £16,200 × 10 years + 204/365 days = £2,138.18

The lump sum automatically paid is:

3/80 × £16,200 × 10 years plus 204/365 days = £6,414.53

Can I give up some of my pension to increase my lump sum?

You can exchange some of your pension for a bigger lump sum on retirement. You will generally be able to take up to a maximum of 25% of the capital value of your pension benefits as a lump sum.

In the example above, the lump sum automatically paid on retirement is roughly 15% of the capital value. Any amount you take as a lump sum above the automatic lump sum would be achieved by exchanging part of your annual pension for a one-off lump sum payment. For each £1 of annual pension you give up you would receive £12 lump sum.

An election to take extra lump sum must be made in writing before your benefits are paid. So that you have plenty of time to make up your mind, it is important that you contact your administering authority well in advance of your intended retirement date so they can provide you with more details. You may wish to seek independent financial advice.

Your pension will be reduced in accordance with any election you make to receive extra lump sum. Any spouse’s, civil partner’s and/or children’s long-term pensions will not be affected if you decide to exchange part of your annual pension for extra lump sum.

How will my pension be paid?

Monthly pension payments will be made direct into your bank or building society account. Similar arrangements can also be made to pay your pension into your account should you move abroad. Further information regarding payment of pensions will be provided to you when you take your pension.

Will my pension increase?

After age 55, members’ pensions in payment will be increased each year in line with the appropriate cost of living index, currently the Consumer Prices Index (CPI). If you retire before age 55, the accumulated effect of inflation since you retired will be added to your pension when you reach age 55. See the Ill health retirement section concerning increases to ill health pensions.

General points to note on retirement benefits

• If your pension benefits are subject to a Pension Sharing Order issued by the Court following a divorce or dissolution of a civil partnership, or are subject to a qualifying agreement in Scotland, your benefits will be reduced in accordance with the Court Order or agreement. See the Pensions and Divorce section for further details.
• HM Revenue and Customs controls the pension savings you can have in a year before you become subject to a tax charge. This is known as the annual allowance. This is in addition to the tax you pay on your pension payments.
• Under HM Revenue and Custom rules, if the LGPS makes an unauthorised payment or if you pay some or all of your LGPS lump sum back into a pension arrangement, there will be a tax charge.
• If you return to employment or office within Local Government or employment with another organisation that participates in the LGPS after taking your pension, it may be reduced or suspended in accordance with the policy adopted by your administering authority. Under the LGPS, this is an administering authority discretion and this policy must be included in a policy statement. Further details will be provided on request.

Ill Health Retirement

What happens if I have to retire early due to ill health?

If you have at least three months total membership and an independent registered medical practitioner approved by your administering authority certifies that you have become permanently unable (until age 65) to perform the duties of your office efficiently because of ill health or infirmity of mind or body, you will receive your pension and lump sum immediately. The medical practitioner must be qualified in occupational health medicine and must not have previously been involved in your case.

How is an ill health pension and lump sum calculated?

Ill health pensions and lump sums are calculated in the same way as detailed in the section on Retirement Benefits, except that the total membership used in the calculation will be increased if your total membership is five years or more. This is to reflect that you are having to retire early. The amount by which it will be increased is shown in the table below.

Total membership awarded	Total membership after increase
Less than 5 years	Actual total membership only
Between 5 and 10 years	Total membership doubled
Between 10 and 13 1/3 years	Total membership increased to 20 years
Over 13 1/3 years	Total membership increased by 6 2/3 years

Your increased membership, however, must not exceed the total membership you would have accrued if you had continued in service until age 65.

What if I do not qualify for an ill health pension and lump sum?

If you have less than three months total membership, you will receive a refund of your contributions.

Points to note on ill health retirement

• Your pension benefits will not be increased if you have previously been awarded an ill health pension under the Scheme.
• If, at the date of retirement, the administering authority is satisfied that there is a life expectancy of less than a year, the administering authority may commute the pension into a lump sum of five times the annual amount of pension given up. No annual allowance tax charge will apply to such a lump sum.
• Ill health pensions are increased each year in line with the appropriate cost of living index, whatever your age.
• You are exempt from the annual allowance if an independent registered medical practitioner certifies that you are suffering from ill health which makes it unlikely that you will be able (otherwise than to an insignificant extent) to undertake gainful work in any capacity before reaching State Pension age.
• See also General points to note on retirement benefits.

Early retirement

Can I retire early?

If you have at least three months total membership you can retire from office and receive payment of your benefits at any time from age 55 onwards.

If you are aged 50 to 54, you may be able to retire from office and receive payment of your benefits immediately but payment of benefits before age 55 is only possible with your council’s consent. This is a council discretion and under the LGPS your council’s policy must be included in their policy statement.

Benefits paid before the age of 55 would be unauthorised under HM Revenue and Customs tax rules and would be subject to significant tax charges.

The Government has announced that the earliest age you can take your pension will increase from age 55 to 57 from 6 April 2028. This will not apply if you have to take your pension early due to ill health. See Pension age changes for more information.

Will my pension and lump sum be reduced if I retire early?

If you joined the LGPS after 30 September 2006, retire and elect to receive benefits before age 65 your pension and lump sum, initially calculated as detailed in the section on Retirement benefits, will be reduced to take account of being paid for longer. How much your benefits are reduced by depends on how early you take them.

The reduction is calculated in accordance with guidance issued by the Government Actuary. The reduction is based on the length of time (in years and days) that you retire early – ie the period between the date your benefits are paid and age 65. The earlier you retire, the greater the reduction.

As a guide, the percentage reductions, issued in July 2023, for retirements up to ten years early are shown in the table below. Where the number of years is not exact, the reduction percentages are adjusted accordingly.

Years paid early	Pension reduction %	Lump sum reduction%
0	0	0
1	4.9	1.7
2	9.3	3.3
3	13.5	4.9
4	17.4	6.5
5	20.9	8.1
6	24.3	9.6
7	27.4	11.1
8	30.3	12.6
9	33.0	14.1
10	35.6	15.5
11	39.5	n/a
12	41.8	n/a
13	43.9	n/a

If you were contributing to the scheme at any time between 1 April 1998 and 30 September 2006, some or all of your benefits paid early could be protected from the reduction if you are a protected member.

The only occasion where this protection does not automatically apply is if you voluntarily choose to take your pension on or after age 55 and before age 60. Your council can choose to allow the protection to apply. This is a discretion and you can ask your council what their policy is on this.

Your council can agree not to make any reduction on compassionate grounds. This is a council discretion. You can ask your council what their policy is on this.

If you voluntarily retire before age 65,you do not have to receive immediate payment of your benefits. You can defer them within the LGPS for payment later as detailed in the Leaving the Scheme before retirement section.

Pension age changes

The Government has announced that the earliest you can take your pension will increase from age 55 to 57 from 6 April 2028. This will not apply if you have to take your pension early due to ill health.

You could be protected from this increase if you joined the LGPS before 4 November 2021. You could also be protected if you transferred a previous pension into the LGPS and certain conditions are met. You will only be able to use this protection if the LGPS rules allow you to take your pension before age 57.

The Government has not yet confirmed if it will allow members who qualify for protection to take their LGPS pension before age 57 from April 2028.

Points to note on early retirement

• If your council gives their consent to pay immediate early retirement benefits before age 55, this may result in a tax charge on your benefits. This would be in addition to the normal PAYE tax on your monthly pension. There will be no additional tax charge if your benefits are paid on or after age 55.
• If your council gives consent to immediate early retirement benefits on or after age 50 and before age 55, your pension will be paid at a flat rate until age 55. At age 55 your pension will be increased by the accumulated effect of inflation since you retired and then increased each year after age 55 in line with the appropriate cost of living index, currently the Consumer Prices Index (CPI).
• See also General points to note on retirement benefits.

Late retirement

What if I carry on working after age 65?

If you carry on in office as an eligible councillor after age 65, you will continue to pay into the Scheme, building up further benefits. You can receive your pension when you retire, or when you reach the eve of your 75th birthday, whichever occurs first.

If you take your pension after age 65, the pension you have built up will be increased to reflect the fact that it will be paid for a shorter time.

Your pension must be paid before your 75th birthday.

See also General points to note on retirement benefits.

Protection for your family

What benefits will be paid if I die in service?

If you die in service as a member of the LGPS, subject to the qualifying conditions detailed, the benefits shown below will be paid.

• A lump sum death grant
  A lump sum death grant of two times your career average pay is payable no matter how long you have been a member of the L G P S, provided you are under age 75 at your date of death.
• A spouse’s or civil partner’s pension
  A short-term pension, at an annual rate equal to your career average pay, is paid to your spouse (either from a same or opposite sex marriage) or civil partner for three months immediately following your death. If there are eligible children (any of whom are in the care of your spouse or civil partner) this pension is paid for six months.
  

If you die in service having built up at least three months total membership, then the L G P S will also pay a long-term pension to your spouse (either from a same or opposite sex marriage) or civil partner commencing when the short-term pension ends. The long-term pension is generally half the pension you would have received if you had retired early due to ill health on the date of death.

• Pensions for eligible children
  Children’s pensions are payable for so long as eligible children remain eligible following your death, no matter how long you have been a member of the LGPS. Eligible children are your children. They must, at the date of your death: 
  • be your natural child (who must be born before your death or within 12 months of your death), or
  • be your adopted child, or
  • be your stepchild or a child accepted by you as being a member of your family (this doesn’t include a child you sponsor for charity) and be dependent on you.
• An eligible child must be:
  • under 18, or
  • aged 18 or over and under 23, and
  • in full-time education or vocational training (although your administering authority can continue to treat the child as an eligible child notwithstanding a break in full-time education or vocational training), or
  • unable to engage in gainful employment because of physical or mental impairment and either:
    • the child has not reached the age of 23, or
    • the impairment is, in the opinion of an independent registered medical practitioner, likely to be permanent and the child was dependent on you at the date of your death because of that mental or physical impairment.

A long-term pension is payable at the rate of one quarter of your notional pension entitlement if there is one eligible child or at the rate of one-half if there are two or more eligible children. If no spouse’s or civil partner’s long-term pension is payable, the pension is payable at the rate of one-third of your notional pension entitlement where there is one eligible child and at the rate of two-thirds where there is more than one eligible child.

The pension may be reduced if a child is receiving pay over and above a set level while in full-time training for a trade, profession or vocation.

Your notional pension entitlement is calculated by reference to the lesser of the total membership you would otherwise have accrued by age 65, or 10 years. If at the date of death you have already built up five or more years’ total membership, and you had not previously retired from the L G P S on health grounds, the notional amount will, if higher, be calculated by reference to the total membership you would have had if you had retired due to ill health.

Normally, payment of a child’s long-term pension will commence when the spouse’s or civil partner’s short-term pension stops. If no spouse’s or civil partner’s short-term pension is payable, a child’s short-term pension, equal to the amount that would have been paid to a spouse or civil partner, is paid for six months. If the child or children are not in the care of the surviving spouse or civil partner, a child’s short-term pension is paid for three months. In both cases, commencement of the child’s long-term pension is normally deferred until the short-term pension stops.

What benefits will be paid if I die after retiring on pension?

If you die after retiring on pension, your benefits will no longer be payable. Your spouse, civil partner, next of kin or person dealing with your Estate must immediately inform the Pension Section of your date of death as otherwise an overpayment could occur. You can find contact details at the beginning of this guide.

The following benefits may then be payable:

• A lump sum death grant
  A lump sum death grant will be payable if you die after receiving your pension for less than five years and you are under age 75 when you die. The sum payable will be five times your annual pension reduced by the pension already paid to you.
• A spouse’s or civil partner’s pension
  A spouse (either from a same or opposite sex marriage) or civil partner will receive a short-term pension for the three months following your death, or six months if one or more eligible dependent children are in the spouse’s or civil partner’s care. This will be equal to the pension you were receiving or would have received but for a reduction due to early retirement or had it not been paid as a lump sum due to exceptional ill health.

After that, the spouse or civil partner will receive a long-term pension generally equal to half the pension you were receiving. The long-term pension will be based on:

• the pension you would have received but for a reduction due to early retirement
• the pension you would have received if you had not exchanged pension for lump sum
• the pension you would have received had it not been paid as a lump sum due to exceptional ill health.

If you married after retirement and you retired on the grounds of permanent ill health, the spouse’s pension will only be based on half of your basic pension, ie excluding any enhancement to your pension on account of ill health retirement. See the Membership increases for ill health retirement table in the Ill health retirement section. If you entered into a civil partnership after retirement, the civil partner’s pension will be half your pension. 

• Pensions for eligible children
  Children’s pensions are payable for so long as eligible children remain eligible following your death. You can find full details about who is eligible to receive a child’s pension in the Pensions for eligible children section. The pension is not calculated, however, against a notional entitlement. It is based on:
  • the pension you were receiving at the date of your death
  • the pension you would have received but for a reduction due to early retirement
  • the pension you would have received if you had not exchanged pension for lump sum, or
  • the pension you would have received had it not been paid as a lump sum due to exceptional ill health.

If your pension was originally calculated on a total membership of less than the shorter of ten years or the amount you could have accrued had you continued working to age 65, this amount is used to increase your pension for the purpose of calculating the children’s pension only.

Points to note on protection for your family

• Your administering authority has the discretion to pay the lump sum death grant to your nominee or personal representatives or to any person who appears, at any time, to have been your relative or dependant. The LGPS allows you to express your wish about who you would like any death grant to be paid to by completing and returning an expression of wish form.
• If any part of the death grant has not been paid by the second anniversary of your death, it must be paid to your personal representatives, ie to your Estate. If you have not already made your wishes known, or you wish to change a previous expression of wish, a form is available from your administering authority.
• Your personal representatives will need to inform H M Revenue and Customs if the value of all the tax-free lump sums you received from UK pensions, plus any relevant death grants, exceeds the HM Revenue and Customs lump sum and death benefit allowance. This does not include any spouse’s, civil partner’s or dependants’ pensions. Under HM Revenue and Customs rules, any excess will be subject to a tax charge. The lump sums paid to or in respect of most scheme members’ will be significantly less than the allowance.
• Spouses’, civil partners’ and children’s pensions are increased each year in line with the appropriate cost of living index (currently the Consumer Prices Index (CPI)) regardless of age.
• Spouses’ and civil partners’ pensions are payable for life even if your spouse or civil partner remarries, enters into a new civil partnership or cohabits.         
• If your pension benefits are subject to a Pension Sharing Order issued by the Court following a divorce or dissolution of a civil partnership, or are subject to a qualifying agreement in Scotland, your benefits will be reduced in accordance with the Court Order or agreement. In consequence, if you remarry or enter into a new civil partnership, any spouse’s pension or civil partner’s pension payable following your death will also be reduced. See the Pensions on divorce section for further details. Benefits payable to eligible children will not be reduced because of a pension share.

Increasing your benefits

In this section we look at the different ways you can pay extra to increase your pension saving.

Additional voluntary contributions (AVCs)

To increase the value of the benefits that you and your dependants receive, you may make additional voluntary contributions arranged through the LGPS, known as in-house AVCs.

All local government administering authorities have an AVC arrangement in which you can invest money, deducted directly from your allowances, through an AVC provider (often an insurance company or building society).

If you choose to pay AVCs under the LGPS, the AVCs are invested separately, in funds managed by the AVC provider. You have your own personal account that, over time, builds up with your contributions and the returns on your investment, and will be available to you when you retire. You can often choose which investment route you prefer.

You decide how much you can afford to pay. You can pay up to 50% of your pay into an in-house AVC in each office you hold where you pay into the LGPS. 

A V Cs are deducted from your allowances, just like your normal contributions. Your LGPS and AVC contributions are deducted before your tax is worked out. If you pay tax, you receive tax relief automatically through the payroll. You qualify for tax relief (normally at your highest rate) on all pension contributions up to 100% of your taxable earnings, including your normal contributions – but see Points to note at the end of this section. Deductions start from the next available pay day after your election has been accepted. You may change or stop your payment at any time whilst you are paying into the LGPS.

At retirement, you must use any of your AVC fund which you do not take as a lump sum to buy an annuity. An insurance company, bank or building society of your choice takes your AVC fund and pays you a pension in return. You can do this at the same time you take your LGPS benefits, or you may be able to defer buying an annuity until any time up to the eve of your 75th birthday. If you carry on paying into the LGPS after age 65 you cannot buy an annuity until you retire, or you reach the eve of your 75th birthday if this is earlier.

An annuity is paid completely separately from your LGPS benefits.

The amount of annuity depends on several factors, such as interest rates and your age. You also have some choice over the type of annuity, for example whether you want a flat-rate pension or one that increases each year, and whether you also want to provide for dependants’ benefits in the event of your death.

Annuities are subject to annuity rates which in turn are affected by interest rates. When interest rates rise, the organisation selling annuities can obtain a greater income from each pound in your AVC fund, and therefore can provide a higher pension. A fall in interest rates reduces the pension which can be purchased.

If you take your AVCs at the same time as your LGPS pension, you may be able to take some or all of your AVCs as a tax-free lump sum providing, when added to the automatic LGPS lump sum as detailed in the Retirement benefits section, the total lump sum does not exceed 25 per cent of the capital value of your L G P S benefits, nor does it exceed the lump sum allowance of £268,275. However, if you have previously taken payment of (‘crystallised’) pension benefits, you will have already used up some of your lump sum allowance.

If you retire and take your AVCs later, you can then normally only have up to 25 per cent of your AVC fund as a lump sum.

Transferring your AVC fund to another scheme

You can transfer your AVC independently of your main scheme benefits and, provided you have stopped paying AVCs, you can transfer your AVC fund even if you continue to contribute to the LGPS.

You can choose to transfer your AVC fund to a scheme that allows you take advantage of the flexibilities introduced from April 2015, eg being able to take a flexible retirement income, take your fund as a number of lump sums, or take the whole fund in one go (all from age 55). You should be aware that there may be tax implications associated with accessing flexible benefits. The income from a pension is taxable; the rate of tax you would pay depends on the amount of income that you receive from a pension and from other sources.

Getting advice

Pension Wise is a Government service from MoneyHelper. It offers free, impartial guidance to members aged 50 and over on what they can do with their defined contributions savings, such as AVCs.

You must either attend a guidance appointment with Pension Wise or opt out of attending one before you can start to receive your AVCs. We encourage you to attend the appointment as it may help you to understand your AVC options. If you wish, we can book the appointment on your behalf. We will give you more information as part of the retirement process.

If you are thinking about taking payment of or transferring your AVC plan you should consider accessing this pension guidance and taking independent advice to help you decide which option is most suitable for you.

Life assurance

You can also pay AVCs to increase your death in service lump sum cover over and above the two times career average pay provided by the LGPS, or to provide additional dependants’ benefits.

Pay into a personal pension plan or stakeholder pension scheme

You may be able to make your own arrangements to pay into a personal pension plan or stakeholder pension scheme at the same time as paying into the LGPS. With these arrangements, you choose a provider, usually an insurance company. You may want to consider their charges, alternative investments and past performance when you make your choice.

You choose how much to pay into the arrangement. You can pay up to 100 per cent of your total UK taxable earnings in any one tax year into any number of concurrent pension arrangements of your choice (or, if greater, £3,600 to a ‘tax relief at source’ arrangement, such as a personal pension or stakeholder pension scheme) and be eligible for tax relief on those contributions.

If you pay into a personal pension plan or stakeholder pension scheme, the contributions you make to it are invested in funds managed by an insurance company. You have your own personal account that, over time, builds up with your contributions and the returns on your investment, and will be available later in your life to convert into additional benefits. You can often choose which investment route you prefer.

When the benefits are paid, you will be able to take up to 25 per cent of your fund as a tax-free lump sum (Provided the lump sum does not exceed £268,275 or, if you have previously taken payment of pension benefits, your remaining lump sum allowance.), with the remainder available to buy you an annuity from an insurance company, bank or building society or to take as a taxable lump sum.

You can get more information on the options available when you take benefits from a personal pension plan or a stakeholder pension scheme from Pension Wise. Pension Wise is a service from MoneyHelper, backed by Government. You can find out more and book an appointment on the Pension Wise page of the MoneyHelper website www.moneyhelper.org.uk. Pension Wise provides guidance on taking flexible benefits only. It does not provide information on taking benefits from a defined benefit scheme such as the LGPS.

Points to note on paying extra

• You can, if you wish, pay up to 100 per cent of your UK taxable earnings in any one tax year into any number of pension arrangements of your choice (or, if greater, £3,600 to a ‘tax relief at source’ arrangement, such as a personal pension or stakeholder pension scheme) and be eligible for tax relief on those contributions.
• The annual allowance limits how much pension savings you can build up in a year before you have to pay a tax charge. Most scheme members’ pension savings in a year will be less than the annual allowance.
• The maximum amount of Scheme AVCs you can pay is 50% of your pay in each office you hold where you are a member of the LGPS.
• If you elect to pay AVCs for additional death benefits, you may be required to satisfy certain medical conditions. You may be asked to complete a medical questionnaire and/or undergo a medical examination at your own expense before your election is accepted.
• Further information on increasing your Scheme benefits is available by contacting your administering authority.

Leaving the Scheme before retirement

If you stop being a councillor participating in the LGPS, what happens to the benefits you have built up in the LGPS depends on your length of scheme membership.

• If you have less than three months’ total membership
  You can take a refund of your contributions less a deduction for tax.
• Or
• You can defer making a decision until you either re-join the same L G P S fund as a councillor member (in Wales), or want to take a refund of contributions, or join a new pension scheme. The option to transfer to a different pension scheme will only be open to you for a limited period.
• If you have at least three months’ total membership
  You can leave your accrued benefits in the L G P S. Your pension and lump sum will be calculated as described in the section on Retirement benefits using the length of your total membership up to the date that you left the Scheme. These are known as deferred benefits.
  Or
  You can transfer an amount equal to the cash equivalent of your pension benefits into your new employer’s scheme provided they are willing and able to accept it, into a personal pension plan or into a stakeholder pension scheme. You cannot transfer your pension benefits to the L G P S in England or Wales unless you again participate in the same L G P S administering authority in Wales as a councillor member.

It may be possible to make a transfer payment to an overseas pension scheme or arrangement that meets HM Revenue and Customs conditions.

What will happen to my benefits if I defer them?

We work out the value of your deferred benefits when you leave the LGPS and hold them in the LGPS for you until you decide to transfer them to another pension scheme, or they are due to be paid.

Deferred benefits become payable at age 65, unless you opt to defer payment beyond that age. You can choose to take payment from age 55. You do not need your former council’s consent to take payment of your benefits from age 55 but they will normally be reduced, as detailed in the Early Retirement section, to take account of the fact that they will be paid for longer.

If you were contributing to the Scheme before 30 September 2006 and you are a protected member, some or all of your benefits could be protected from the reduction. However, if you voluntarily choose to take your pension between age 55 and 60, the protection will not automatically apply. Your former council can choose to allow the protection to apply. This is a discretion and you can ask them what their policy is on this.

The Government has announced that the earliest age you can take your pension will increase from age 55 to 57 from 6 April 2028. This will not apply if you have to take your pension early due to ill health. See Pension age changes for more information.

You can also ask to take payment of your deferred benefits early between age 50 and 55, with your former council’s consent. Your benefits would normally be reduced to take account of the fact that they will be paid for longer.

If your deferred benefits are paid before age 55, they will be subject to significant tax charges (in addition to normal income tax).

Your former council can agree not to make any reduction for early payment on compassionate grounds. This is a council discretion and you can ask your council what their policy is on this.

Your deferred benefits can be paid without reduction from any age in the event of ill health.

What will happen if I die before my deferred benefits are paid?

Should you die while your benefits are deferred, your retirement lump sum will be paid as a death grant.

A spouse’s (either from a same or opposite sex marriage) or civil partner’s long-term pension will also become payable. The spouse’s or civil partner’s pension is payable at the rate of one-half of your deferred pension.

Long-term children’s pensions will be payable for so long as eligible children remain eligible following your death, as detailed in the Protection for your family section. The pension is based on the pension you would have received had your deferred benefits been put into payment on the date of your death. If your pension would have been calculated on a total membership of less than the shorter of ten years or the amount you could have accrued had you continued in office to age 65, that amount is used to increase your pension for the purpose of calculating the children’s pension only.

Can I transfer my LGPS pension?

If you are interested in transferring the value of your LGPS pension rights to another occupational pension scheme, a personal pension plan or a stakeholder pension scheme you can ask for a transfer value quotation to be provided. This is known as the ‘cash equivalent’ transfer value. You cannot combine your benefits if you re-join the LGPS in a different administering authority.

Under provisions introduced by the Pensions Act 1995, a quotation must be guaranteed for a period of three months from the date on which it was calculated (the ‘Guarantee Date’). If you wish to transfer, you must return a written election to proceed with the guaranteed transfer value within the three-month guarantee period. If you opt to proceed, the normal time limit for the Scheme to pay the guaranteed transfer value will be six months from the ‘Guarantee Date’. If your administering authority does not make payment within this period it will need to recalculate the value as at the actual date of payment and pay the recalculated value or, if it is greater, the original value plus interest.

Transfer values are calculated in accordance with the terms and conditions of the Local Government Pension Scheme Regulations 1997 (as amended) which comply with requirements of the Pensions Schemes Act 1993.

If you are considering whether to transfer, make sure you have full information about the two pension arrangements, ie details of what your benefits are worth in the L G P S and details of what your benefits would be worth in the new pension scheme, if transferred. When you compare your options, don’t forget that your L G P S benefits are guaranteed cost of living increases.

Transferring your pension rights is not always an easy decision to make. You may wish to seek the help of an independent financial adviser before you make a decision to transfer your deferred benefits to a personal pension plan, stakeholder pension scheme or to an employer’s money purchase scheme, as you will be bearing all of the investment risk. This decision could significantly affect your future pension benefits.

If you are transferring from the LGPS to a defined contribution pension scheme you must take appropriate independent financial advice before transferring.

This is a legal requirement if the cash equivalent transfer value of all your benefits in the L G P S (excluding any Additional Voluntary Contributions (AVCs)) is more than £30,000. If the cash equivalent transfer value of all your benefits in the LGPS (excluding any Additional Voluntary Contributions (AVCs)) is £30,000 or less, you are not legally required to take advice. However, transferring your pension rights is not always an easy decision to make. Your decision could significantly affect your income in retirement. Seeking the help of an independent financial adviser before transferring your deferred benefits to a defined contribution scheme could help you make an appropriate decision.

If the cash equivalent transfer value of all your benefits in the LGPS (excluding any Additional Voluntary Contributions (AVCs)) is more than £30,000, your administering authority will check that you have received appropriate independent financial advice before your transfer to a scheme offering flexible benefits can proceed. They will require relevant documentation to evidence this. Your administering authority will provide you with more details if you request a transfer quotation.

If a full transfer payment is made, you will not be entitled to any further benefits from the L G P S for yourself, your spouse, civil partner or eligible children.

Points to note on leaving the Scheme before retirement

• A refund of contributions cannot be paid if you already have a deferred benefit in the LGPS in England or Wales.
• Only Scheme members who leave more than one year before age 65can transfer their pension rights. The latest that you can elect to proceed with a transfer is one year before age 65.
• You must take appropriate independent financial advice before transferring from the LGPS to a defined contribution pension scheme. This is a legal requirement if the cash equivalent transfer value of all your benefits in the LGPS (excluding any Additional Voluntary Contributions (AVCs)) is more than £30,000.
• When you take your benefits from the LGPS, you will be given the option to exchange some of your pension for a bigger lump sum. See the Retirement benefits section for further details.
• If your council gives their consent to the early payment of your benefits before age 55, this may result in a tax charge on your benefits. This would be in addition to the normal PAYE tax on your monthly pension. Payment of benefits on or after age 55 will not result in this additional tax charge.
• Deferred benefits, including the lump sum, are increased each year in line with the appropriate cost of living index (currently the Consumer Prices Index (CPI)). However, should your deferred benefits be brought into payment before age 55 on the grounds of permanent ill health, pensions increase is only payable before your 55th birthday if you are certified as being incapable of engaging in any regular full-time work. If you are not so certified, or your deferred benefits are brought into payment with your former authority’s consent before age 55, the benefits will be paid at a flat rate until age 55. Then, at age 55, the benefits will be increased by the accumulated effect of inflation since they were brought into payment.
• Spouses’ and civil partners’ pensions are payable for life even if your spouse or civil partner remarries, enters into a new civil partnership or cohabits. Spouses’, civil partners’ and children’s pensions are increased each year in line with the appropriate cost of living index (currently CPI) regardless of age.
• If your pension benefits are subject to a Pension Sharing Order issued by the Court following a divorce or dissolution of a civil partnership, or are subject to a qualifying agreement in Scotland, your benefits will be reduced in accordance with the Court Order or agreement. In consequence, if you have deferred benefits and you remarry or enter into a new civil partnership, any spouse’s or civil partner’s pension payable following your death will also be reduced. Benefits payable to eligible children will not be reduced because of a pension share. See the Pensions and divorce section for further details.

Further information on the options available will be sent to you on leaving.

Opting out of the LGPS

Can I opt out of the LGPS?

You can leave the LGPS at any time by giving your council notice in writing. An election to opt out becomes effective from the end of the payment period during which you gave notification, unless your notification specifies a later date. You are recommended to obtain advice before opting out of the LGPS. If you opt out, the same options are available to you as detailed in the section on Leaving the Scheme before retirement. The main difference is that deferred benefits cannot be paid until you have ceased to be an eligible councillor or, if earlier, age 75.

Can I re-join the LGPS at a later date?

If you opt out once, you can re-join the LGPS at any time whilst you remain an eligible councillor.

If you opt out of the LGPS more than once, unless you elect to re-join the Scheme within three months of commencing as an eligible councillor with a new council (in Wales only), you will only be allowed to re-join at the discretion of your council. You can ask your council what their policy is on this.

Points to note on opting out

• You may wish to obtain independent financial advice before you make a decision to opt out of the LGPS .

Some other LGPS provisions

The LGPS requires your administering authority to:

• pay interest on lump sum benefits that are paid more than one month after they should have been paid
• pay interest on pensions that are paid more than a year after they should have been paid
• pay interest on refunds of contributions that are paid more than a year after the date you left the LGPS
• issue annual benefit statements to Scheme members (other than to pensioners)
• have a statement setting out their policy on communicating with scheme members, members’ representatives, prospective members and employers.

The LGPS allows your administering authority to:

• commute small pensions into single lump sum payments. The circumstances where this may happen are restrictive, particularly if you have other pension benefits.

The LGPS allows your administering authority to:

• reduce pension benefits if an LGPS member leaves as a result of a criminal, negligent or fraudulent act or omission, as a result of which you have incurred some monetary obligation to the council.
• forfeit a LGPS member’s pension rights if the Secretary of State for Levelling Up, Housing and Communities agrees and the member has been convicted of a serious offence connected with their office

The LGPS does not allow you to:

• assign your benefits. Your LGPS benefits are strictly personal and cannot be assigned to anyone else or used as security for a loan.

Pensions and divorce or dissolution of a civil partnership

Under the LGPS, if you get divorced or your civil partnership is dissolved:

• your ex-spouse or ex-civil partner will stop being entitled to a spouse’s or civil partner’s pension should you die before them.
• any children’s pension payable to an eligible child in the event of your death will not be affected by your divorce or dissolution.
• If you have said that you would like your ex-spouse or ex-civil partner to receive any lump sum death grant payable on your death by completing and returning an expression of wish form, this will remain in place unless you change it. The Court may, however, issue an Earmarking Order stating that all or part of any lump sum death grant is payable to your ex-spouse or ex-civil partner.

In proceedings for divorce, judicial separation or nullity of marriage, or for dissolution, separation or nullity of a civil partnership, you will be required to obtain the cash equivalent value of your pension rights from the administering authority which the Court will take into account in the divorce or dissolution settlement. In Scottish divorces / dissolution, only the pension rights built up during the period of the marriage / civil partnership are taken into account.

The Court may offset the value of your pension rights against your other financial assets in the divorce / dissolution settlement or it may issue a Pension Sharing Order or an Earmarking Order against your pension.

If the Court issues an Earmarking Order, the Order may require that when your benefits come into payment your ex-spouse / ex-civil partner should receive one, or a combination, of the following benefits:

• all or part of your pension (this does not apply to divorces / dissolutions in Scotland)
• all or part of your lump sum retirement grant
• all or part of any lump sum paid in the event of your death.

An Earmarking Order against pension payments, but not lump sums (unless the Order directs otherwise), will automatically lapse if your former spouse or civil partner remarries or enters into a civil partnership and the full pension would be restored to you. Pension payments to your former spouse or civil partner would cease on your death.

If the Court issues a Pension Sharing Order, or you are subject to a qualifying agreement in Scotland, part of your benefits are transferred into your ex-spouse’s or ex-civil partner’s possession.

Your pension, your lump sum and the contingent spouse’s / civil partner’s pension, but not the contingent children’s pensions, will be reduced accordingly, and your ex-spouse / ex-civil partner will hold benefits in his / her own right which can be left in the Scheme to be payable from, normally, age 65, or can be taken on or after age 55 and before age 65 with a reduction for early payment, or transferred to another qualifying pension scheme.

The Government has announced that the earliest age your ex-spouse / ex-civil partner can take their pension will increase from age 55 to 57 from 6 April 2028. See Pension age changes for more information.

The reduction to your benefits is known as a pension debit. The amount of the pension debit will be increased in line with the rise in the appropriate cost of living index(es) between the date the debit was first calculated and the date your benefits are paid. When your benefits become payable, the revalued amount of the pension debit will be deducted from your retirement benefits in accordance with guidance from the Government Actuary.

You may be able to pay additional voluntary contributions or contribute to a concurrent personal pension plan or stakeholder pension scheme in order to make up for the benefits ‘lost’ following a pension share.

All correspondence received by the administering authority in connection with divorce or dissolution proceedings will be acknowledged in writing. If you do not receive an acknowledgement, you should contact the administering authority to ensure that it has received your correspondence.

The cost of supplying information and complying with any court order imposing obligations on the LGPS will be recovered from you and/or your ex-spouse or ex-civil partner in accordance with a schedule of charges published by the administering authority.

Points to note about pension sharing

• If your pension benefits in the LGPS are reduced following a Pension Sharing Order then, for the purposes of calculating the value of your pension savings in the LGPS for the annual allowance, the reduction in your benefits is ignored in the year that the Pension Sharing Order takes effect.

Scheme administration

Who runs the LGPS?

The L G P S is run by administering authorities, for example county councils, in accordance with regulations approved by Parliament. Each administers their own fund, into which all contributions are paid. Every three years, independent actuaries carry out a valuation of each fund and set the rate at which the participating employers must contribute to fund fully the payment of Scheme benefits for that fund’s membership.

How is the Scheme amended?

The Scheme regulations for councillors are made under the Superannuation Act 1972. Changes to the rules are discussed at national level by employee and employer representatives but can only be amended with the approval of Parliament. Your administering authority must keep you informed of any changes that are made.

Are the Scheme benefits protected?

As the Scheme is set up by statute, payment of the Scheme benefits is guaranteed by law.

What other legislation applies to the Scheme?

The Scheme is a registered public service scheme under Chapter 2 of Part 4 of the Finance Act 2004. It achieved automatic registration by virtue of Part 1 of Schedule 36 of that Act (because the Scheme was, immediately before 6th April 2006, both a retirement benefits scheme approved under Chapter 1 of Part XIV of the Income and Corporation Taxes Act 1988 and a relevant statutory scheme under section 611A of that Act). This means, for example, that you receive tax relief on your contributions. It complies with the relevant provisions of the Pension Schemes Act 1993, the Pensions Act 1995 and the Pensions Act 2004.

How can I check the accuracy of my pension records?

To maintain the security of any information about you, your administering authority is registered under the current Data Protection Acts. You can check that your computerised personal record is accurate, although a small fee may occasionally be charged for this.

What other information am I entitled to?

You are entitled to obtain a copy of the Local Government Pension Scheme Regulations 1997 (Statutory Instrument Number 1997 No.1612) and subsequent amendments. The regulations are available from The Stationery Office.

A copy of the regulations may be inspected at the offices of your administering authority. In addition, you are entitled to view, and take copies of, your administering authority’s Annual Report and Accounts.

Help with pension problems

Who can help me if I have a query or complaint?

If you are in any doubt about your benefit entitlements or have a problem or question about your L G P S membership or benefits, please contact the Pension Section of your administering authority. They will seek to clarify or put right any misunderstandings or inaccuracies as quickly and efficiently as possible.

If you are still dissatisfied with any decision made in relation to the Scheme you have the right to have your complaint reviewed under the Internal Disputes Resolution Procedure. There are also other regulatory bodies that may be able to assist you.

The various ways you can ask for help with a pension problem are:

Internal Disputes Resolution Procedure

In the first instance, you should write to the person nominated by the council that made the decision about which you wish to appeal. You must do this within six months of the date of the notification of the decision or the act or omission about which you are complaining, or such longer period that the nominated person considers reasonable. The nominated person will consider your complaint and notify you of his / her decision. If you are still dissatisfied with that person’s decision or their failure to make a decision, you may apply to the administering authority within six months of the date of the decision to have the decision reconsidered.

A leaflet explaining the Internal Disputes Resolution Procedure and relevant time limits is available from your administering authority’s Pension Section.

To avoid any unnecessary effort on your behalf we would welcome the opportunity to attempt to resolve with you the matter with which you are dissatisfied before you resort to a formal complaint.

MoneyHelper

MoneyHelper is provided by the Money and Pensions Service. MoneyHelper provides independent and impartial information about pensions, free of charge, to members of the public. MoneyHelper is available to assist members and beneficiaries of the scheme with any pension query they have or any general requests for information or guidance concerning their pension benefits. MoneyHelper can be contacted:

In writing:          120 Holborn, London, EC1N 2TD

By telephone:   0800 011 3797

Website:           www.moneyhelper.org.uk/en/pensions-and-retirement/

The Pensions Ombudsman (TPO)

TPO deals only with pension complaints. It can help if you have a complaint or dispute about the administration and / or management of a personal or occupational pension scheme. Some examples of the types of complaints it considers are (this list is not exhaustive):

• automatic enrolment
• benefits: including incorrect calculation, failure to pay or late payment
• death benefits
• failure to provide information or act on instructions
• ill health
• interpretation of scheme rules
• misquote or misinformation
• transfers.

You have the right to refer your complaint to TPO free of charge. There is no financial limit on the amount of money that TPO can make a party award you. Its determinations are legally binding on all parties and are enforceable in court.

You must contact TPO about a complaint within three years of when the event(s) you are complaining about happened or, if later, within three years of when you first knew about it (or ought to have known about it). There is a discretion for those time limits to be extended. TPO can be contacted:

By email:          enquiries@pensions-ombudsman.org.uk      

By telephone:   0800 917 4487

Website:           www.pensions-ombudsman.org.uk (where you can submit an online complaint form)

The Pensions Regulator

This is the regulator of work-based pension schemes. The Pensions Regulator has powers to protect members of work-based pension schemes and a wide range of powers to help put matters right, where needed. In extreme cases, the regulator is able to fine trustees or employers, and remove trustees from a scheme.

Telephone:       0345 600 7060

Website:           www.thepensionsregulator.gov.uk

How can I trace my pension rights?

The Pension Tracing Service holds details of pension schemes, including the LGPS, together with relevant contact addresses. It provides a tracing service for ex-members of schemes with pension entitlements (and their dependants) who have lost touch with previous schemes. All occupational and personal pension schemes must register if the pension scheme has current members contributing to the scheme or people expecting benefits from the scheme. If you need to use this service, please contact the Pension Tracing Service:

By telephone:   0800 731 0193 Website:       www.gov.uk/find-pension-contact-details

Don’t forget to keep your pension providers up to date with any change in your home address and other contact details.

Pension terms defined

Administering authority

Please see the section entitled Who runs the LGPS?

Annual Allowance  

Annual allowance – Standard rules

The annual allowance is the amount by which the value of your pension benefits may increase in any one year without you having to pay a tax charge.

The increase in the value of your pension savings in the LGPS in a year is calculated by working out the value of your benefits immediately before the start of the ‘pension input period’, increasing the value by inflation and then comparing it with the value of your benefits at the end of the ‘pension input period’.

The ‘pension input period’ (PIP) is the period over which your pension growth is measured. In April 2023, the annual allowance increased from £40,000 to £60,000.

Generally speaking, the assessment covers any pension benefits you have in all tax-registered pension arrangements where you have been an active member of the scheme during the year ie you have paid contributions during the tax year or your employer has paid contributions on your behalf.

Carry forward

You may be subject to a tax charge if the value of your pension savings increases by more than the annual allowance in a year. However, a carry forward rule allows you to carry forward unused annual allowance from the previous three years. This means that, even if the value of your pension savings increases by more than the annual allowance in a year, you may not have to pay a tax charge.

For example, the value of your pension savings in 2024/25 increased by £70,000 (ie by £10,000 more than the annual allowance) but in the three previous years had increased by £25,000, £28,000 and £30,000. The amount by which the increase in your pension savings fell short of the annual allowance for those three years would more than offset the £10,000 excess pension saving in the 2021/22 year. You would not have to pay an annual allowance tax charge.

To carry forward unused annual allowance from an earlier year, you must have been a member of a tax registered pension scheme in that year.

Most people will not be affected by the annual allowance tax charge because the value of their pension savings will not increase in a year by more than the annual allowance or, if it does, they are likely to have unused allowance from previous years that can be carried forward.

Working out whether you are affected by the annual allowance is quite complex, but this should help you work out your general position.

Special rules apply if you have accessed flexible benefits or if you are a higher earner and your annual allowance is tapered.

In general terms, the increase in the value of your LGPS pension savings in a year is calculated by working out the value of your benefits immediately before the start of the input period, increasing them by inflation, and comparing them with the value of your benefits at the end of the input period. In a defined benefit scheme like the LGPS, the value of your benefits is calculated by multiplying your annual pension by 16 and adding any lump sum you are automatically entitled to from the pension scheme. If the difference between:

• the value of your benefits immediately before the start of the input period and
• the value of your benefits at the end of the input period plus any contributions you have paid into the Scheme’s Additional Voluntary Contribution (AVC) arrangement in the year or that you and your employer have paid into the Scheme’s Shared Cost AVC arrangement in the year

is more than the annual allowance, you may have to pay a tax charge.

The method of valuing benefits in other schemes may be different from the method used in the LGPS.

‘Flexible benefits’ and the annual allowance

If you have benefits in a money purchase (defined contribution) pension arrangement which you have flexibly accessed on or after 6 April 2015, then the Money Purchase Annual Allowance (MPAA) rules may apply. The MPAA will only apply if your total contributions to a money purchase arrangement in a PIP exceed the MPAA. 

Generally, if you have flexibly accessed any benefits in a money purchase arrangement on or after 6 April 2015, any further contributions you make to a money purchase scheme in subsequent tax years will be tested against the MPAA. If your contributions exceed the MPAA, your defined benefit pension (LGPS) savings will be tested against the alternative AA and you will pay a tax charge in respect of your money purchase saving in excess of the MPAA.

Tax year	MPAA	Alternative annual allowance if MPAA is exceeded
2016/17	£10,000	£30,000
2017/18 to 2022/23	£4,000	£36,000
2023/24 onwards	£10,000	£50,000

‘Flexible access’ means:

• taking a cash amount over the tax-free lump sum from a flexi-access drawdown account
• taking an uncrystallised funds pension lump sum
• purchasing a flexible annuity
• taking a scheme pension from a defined contribution scheme with fewer than 12 pensioner members or
• taking a stand-alone lump sum if you have primary but not enhanced protection. A stand-alone lump sum is a lump sum relating to pre 6 April 2006 where the whole amount can be taken as a lump sum without a connected pension.

Annual allowance – additional information

If your pension benefits in the LGPS are reduced following a Pension Sharing Order or a qualifying agreement in Scotland (issued as a result of a divorce or dissolution of a civil partnership) then, for the purposes of calculating the value of your pension savings in the LGPS, the reduction in your benefits is ignored in the year that the Pension Sharing Order or qualifying agreement is applied to your benefits.

If you retire on the grounds of permanent ill health and an independent registered medical practitioner certifies that you are suffering from ill health which makes it unlikely that you will be able to undertake gainful work in any capacity, other than to an insignificant extent, before reaching your State Pension Age, there is no annual allowance tax charge on the ill health retirement benefits.

The annual allowance assessment covers any pension benefits you may have where you have been an active member during the tax year, not just benefits in the LGPS.

Your administering authority will inform you if your LGPS pension savings in a pension input period are more than the standard annual allowance, or if it believes you have exceeded the MPAA. They must inform you no later than 6 October following the end of the relevant tax year. Your administering authority is not required to inform you if you exceed the tapered annual allowance.

If you exceed the annual allowance in any year, you are responsible for reporting this to HMRC on your self-assessment tax return. Your pension fund administrator will be able to tell you how much the value of your LGPS benefits has increased during an input period, plus the amount of any Additional Voluntary Contributions (AVCs) you may have paid during the input period.

If you have an annual allowance tax charge that is more than £2,000 and your pension savings in the LGPS alone have increased in the tax year by more than the standard annual allowance you may be able to opt for the LGPS to pay some or all of the tax charge on your behalf. The tax charge would then be recovered from your pension benefits.

If you want the LGPS to pay some or all of an annual allowance charge on your behalf, you must notify them no later than 31 July in the year following the end of the tax year to which the annual allowance charge relates. However, if you are retiring and become entitled to all of your benefits from the LGPS and you want the LGPSS to pay some or all of the tax charge on your behalf from your benefits, you must tell your pension administrators before you become entitled to those benefits. Your pension administrators will be able to tell you more about this option and the time limits that apply.

Tapered annual allowance for higher earners

From the tax year 2016/17 onwards, the annual allowance is tapered for high earning individuals. The annual allowance will be reduced if your ‘Threshold income’ and ‘Adjusted income’ exceed the limits in a year. For every £2 that your Adjusted Income exceeds the limit, your annual allowance is tapered down by £1. Your annual allowance cannot be reduced below the minimum that applies. The table below shows the changes to the tapered annual allowance over time.

	Definition	2016/17 to 2019/20	2020/21 to 2022/23	2023/24 onwards
Threshold income	Broadly your taxable income after the deduction of your pension contributions	£110,000	£200,000	£200,000
Adjusted income	Broadly your threshold income plus pensions savings built up over the tax year	£150,000	£240,000	£260,000
Minimum AA	If your annual allowance is tapered, the minimum annual allowance that can apply	£10,000	£4,000	£10,000

Threshold income includes all sources of income that are taxable eg property income, savings income, dividend income, pension income, social security income (where taxable), state pension income etc.

You are not allowed to deduct from taxable income any amount of employment income given up for pension provision as a result of any salary sacrifice made on or after 9 July 2015.

How does the taper work?

From the 2023/24 year onwards, the taper reduces the annual allowance by £1 for £2 of Adjusted income received over £260,000, until a minimum annual allowance of £10,000 is reached.

Adjusted Income	Annual allowance
£260,000 or below	£60,000
£280,000	£50,000
£300,000	£40,000
£320,000	£30,000
£340,000	£20,000
£360,000 or above	£10,000

Tables 7 and 8 show the effect of the tapered annual allowance for the years up to 2022/23.

Adjusted Income	Annual allowance
£240,000 or below	£40,000
£250,000	£35,000
£260,000	£30,000
£270,000	£25,000
£280,000	£20,000
£290,000	£15,000
£300,000	£10,000
£312,000 or above	£4,000

Adjusted Income	Annual Allowance
£150,000 or below	£40,000
£160,000	£35,000
£170,000	£30,000
£180,000	£25,000
£190,000	£20,000
£200,000	£15,000
£210,000 or above	£10,000

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Example 2 – Sanjay

Gross salary 2019/20                                                 £130,000

Less employee pension contributions (11.4%)            £14,820

Plus taxable income from property                             £30,000

Threshold income 2019/20                                      £145,180

Plus pension savings in the year                                £42,449

Adjusted income 2019/20                                        £187,629

Sanjay’s Threshold income is more than £110,000 and his Adjusted income is more than £150,000. His annual allowance is tapered for the 2019/20 year.

Tapered annual allowance                                         £21,186*

In excess of annual allowance                                    £21,263 (£42,449 – £21,186)

Annual allowance tax charge at marginal rate         £8,505.20 (marginal rate of 40% assumed)

* Taper = £187,629 – £150,000 = £37,629 ÷ 2 = £18,814 (rounded down)
  Standard annual allowance £40,000 – £18,814 = tapered AA £21,186

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Example 3 – Cerys

Gross salary 2021/22                                                 £220,000

Less employee pension contributions (12.5%)            £27,500

Threshold income 2021/22                                      £192,500

Pension savings in the year                                       £71,837

Cerys’s Threshold income is less than £200,000. Her annual allowance will not be tapered in 2021/22. Cerys’s pension savings will be measured against the standard annual allowance of £40,000.

Standard annual allowance                                        £40,000

Pension savings in excess of annual allowance          £31,837

Annual Allowance tax charge at marginal rate        £14,327 (marginal rate of 45% assumed)

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Example 4 – Huang

Gross salary 2021/22                                        £210,000

Less employee pension contributions (12.5%)   £26,250

Plus taxable income from property                     £30,000

Threshold income 2021/22                              £213,750

Plus pension saving in the year                         £68,571

Adjusted income 2021/22                                £282,321

Huang’s Threshold income is more than £200,000 and her Adjusted income is more than £240,000. Her annual allowance will be tapered for the 2021/22 year.

Tapered annual allowance                                 £18,840*

In excess of annual allowance                           £49,731

Annual allowance tax charge at marginal rate          £22,379 (marginal rate of 45% assumed)

* Taper = £282,321 – £240,000 = £42,321 ÷ 2 = £21,160 (rounded down)
Standard annual allowance £40,000 – £21,160 = £18,840

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We have made no allowance for any carry forward in the examples above. In working out the pension savings in the year we have assumed:

• inflation adjustment of zero
• the members have no final salary benefits in the LGPS, and
• the members are not paying any additional contributions.

Career average pay

Career average pay is the pay for each year or part year ending 31 March adjusted (other than the final year’s pay) by the change in the cost of living, as measured by the appropriate index (currently the Retail Prices Index (RPI)), between the end of the relevant year and the last day of the month in which the councillor member’s active membership of the Scheme ends. The aggregate of each year’s revalued pay is then divided by the total number of years and part years to arrive at the career average pay. This is the figure used to calculate your pension benefits.

Example 5: Career average pay

Assume that a councillor was in the Scheme for three years from 1 May 2013 to 30 April 2016.

Table 8: Career average pay

Period	Pay for period	Inflation to apply for period	Pay plus inflation
1 May 2013 to 31 March 2014	£8,250	1 April 2014 to 30 April 2016	£8,463.70
1 April 2014 to 31 March 2015	£9,300	1 April 2015 to 30 April 2016	£9,455.54
1 April 2015 to 31 March 2016	£9,500	1 April 2016 to 30 April 2016	£9,510.92
1 April 2016 to 30 April 2016	£800	None	£800
Total career pay			£28,230.16 (A)
Career average pay			£9,410.05 (A ÷ 3)

Should you reach age 65 and continue to contribute to the LGPS, please refer to the Late retirement section.

Civil partnership

A civil partnership is a relationship between two people of the same sex or the opposite sex (‘civil partners’) which is formed when they register as civil partners of each other.

Contracted out

The LGPS was formerly contracted out of the State Earning Related Pension Scheme (SERPS)and the State Second Pension (S2P). This meant that, until 5 April 2016, before State Pension Age you paid reduced National Insurance contributions between certain thresholds, unless you had opted to pay the married woman’s / widow’s reduced rate of National Insurance.

The LGPS guarantees to pay you a Guaranteed Minimum Pension (GMP) for being contracted out of the State Earning Related Pension Scheme (SERPS).

From 6 April 2016 the contracted out status ceased to exist for all pension schemes due to the introduction of the new single tier State Pension. From 6 April 2016, members of the LGPS pay the standard rate of National Insurance.

Discretion

This is the power given by the LGPS to enable your council or your administering authority to choose how they will apply the Scheme in respect of certain provisions.

Under the LGPS your council or your administering authority is obliged to consider how to exercise their discretion. In respect of some of these discretionary provisions, they must have a written policy statement on how they will apply their discretion. They have a responsibility to act with ‘prudence and propriety’ in formulating their policies and must keep them under review. You may ask your council or your administering authority what their policy is in relation to a discretion.

Eligible councillor (from 1 April 2014)

This is a councillor who is eligible for membership of the L G P S in accordance with the scheme of allowances published by a Welsh county council or county borough council.

If you were a councillor or elected mayor in England who was a member of the LGPS on the 31 March 2014, you could have continued to pay pension contributions and build up pension benefits in the LGPS until the end of the term of office you were in on 31 March 2014 (or age 75 if earlier).

Guaranteed Minimum Pension (GMP)

The L G P S guarantees to pay you a pension that is at least as high as you would have earned had you not been contracted out of the State Earning Related Pension Scheme (SERPS) at any time between 6 April 1978 and 5 April 1997. This is called the Guaranteed Minimum Pension (GMP).

Lifetime allowance

Until 6 April 2023, the lifetime allowance limited the total value of all pension benefits you could have without triggering an excess benefits tax charge. If the value of the pension benefits you took before 6 April 2023 was more than the lifetime allowance, or more than any protections you had, you will have had to pay tax on the excess benefits.

Transitional arrangements were in place in the 2023/24 year and the lifetime allowance was abolished completely from 6 April 2024.

Lump sum allowance

The Government introduced two new lump sum allowances from 6 April 2024. The lump sum allowance is set at £268,275. It limits the amount of tax-free cash members can take from UK pension schemes. The lump sum allowance is used up when you take:

• a pension commencement lump sum
• an uncrystallised funds pension lump sum
• a stand-alone lump sum.

These lump sum payments (or part of them) use up your lump sum allowance even if you took them before 6 April 2024. Your administering authority will ask you about pensions and lump sums you have already received when they are preparing to pay your LGPS pension. If you have used up your lump sum allowance, you will have to pay tax at your marginal rate on the excess.

Lump sum and death benefit allowance

The lump sum and death benefit allowance limit is £1,073,100. It limits the amount of tax-free cash taken from UK pension schemes by an individual and paid in respect of them when they die. The lump sum and death benefit allowance is used up when the following lump sums are paid:

• a pension commencement lump sum
• an uncrystallised funds pension lump sum
• a stand-alone lump sum
• a serious ill health lump sum
• a relevant lump sum death benefit.

These lump sums (or part of them) use up your lump sum and death benefit allowance even if you took them before 6 April 2024. Your administering authority will ask about pensions and lump sums you have already received when they are preparing to pay your LGPS pension. If you have used up your lump sum and death benefit allowance, you will have to pay tax at your marginal rate on the excess.

Pay

In England, this is your basic allowance or special responsibility allowance, or both, which is specified as being pensionable in your council’s scheme of allowances. In Wales it is your basic and special responsibility allowance. It does not include any dependant’s carer’s allowance, travelling and subsistence allowance, or co-optees allowance.

Policy statement

This is a statement that your council and your administering authority must publish, setting out how they have chosen to exercise certain discretions under the LGPS. Other discretions may also be included. You may ask your council and your administering authority for the latest copy of their policy statements.

Protected member

If you were contributing to the Scheme at any time between 1 April 1998 and 30 September 2006 you may have protected rights regarding early payment of your benefits. This protection is called the 85-year rule. Working out how you are affected by the 85-year rule can be quite complex, but the information below should help you work out your general position.

The 85-year rule does not give you any protection if you take your pension after age 65.

If you voluntarily choose to take your pension on or after age 55 and before age 60 and you have rule of 85 protections, these will not automatically apply. Your council can choose to allow the rule of 85 to apply. This is a discretion and you can ask your council what their policy is on this.

If you voluntarily choose to take your pension on or after age 55 and before age 60 and your council does not choose to allow the rule of 85 to apply, your benefits will be reduced.

The Government has announced that the earliest age you can take your pension will increase from age 55 to 57 from 6 April 2028. This will not apply if you have to take your pension early due to ill health. See Pension age changes for more information.

If you turn 60 after 31 March 2020 and choose to retire on or after age 60 and before age 65 (or between age 55 and 60 and your council chooses to allow the rule of 85 to apply) you may have some protection from the reductions applied to benefits voluntarily taken before age 65:

• If you satisfy the 85-year rule when you start to receive your pension, the benefits you have accrued up to 31 March 2008 will not be reduced. However, the benefits built up after 31 March 2008 will be reduced by the factor shown in the early retirement reduction table which relates to the number of years the benefits are being paid earlier than age 65.
• If you do not satisfy the 85-year rule when you start to receive your pension but would have satisfied the rule if you had remained in the Scheme until age 65, the calculation of your benefits is split into two parts. Firstly, all the benefits you have built up in the Scheme up to 31 March 2008 will be reduced by the factor shown in the early retirement reduction table which relates to the number of years the benefits are being paid earlier than the date you would have met the 85 year rule. Secondly, any benefits you have built up in the Scheme after 31 March 2008 will be reduced by the appropriate factor shown in the early retirement reduction table which relates to the number of years the benefits are being paid earlier than age 65.
• If you do not satisfy the 85 year rule when you start to receive your pension, and would not have satisfied the rule if you had remained in the scheme until age 65, all the benefits you have built up in the Scheme will be reduced by the appropriate factor shown in the early retirement reduction table which relates to the number of years the benefits are being paid earlier than age 65.

If you reached 60 between 1 April 2016 and 31 March 2020 and choose to retire before age 65, you may have additional protection. The benefits you built up between 1 April 2008 and 31 March 2020 will be reduced if you take them before age 65, but the reduction is lower than the standard reduction that would otherwise apply.

How do I know if I satisfy the 85-year rule?

The rule is satisfied if your membership and age – each in whole years – adds up to 85.

Membership that counts in working out the 85-year rule:

• the number of years that you have been an LGPS member as a councillor or elected mayor
• plus, for deferred benefits, the period between the date of leaving and the date benefits are bought into payment.

Membership that does not count in working out the 85-year rule

• any membership in respect of which you are already in receipt of a Local Government pension
• membership in respect of which you hold a Local Government deferred pension which relates to an earlier period of membership of the Scheme as a councillor or elected mayor
• membership in respect of any other earlier period of membership of the Scheme as a councillor or elected mayor which has not been aggregated with your current period of membership.

SERPS (State Earnings Related Pension Scheme)

This is the extra earnings-related part of the state pension that employed people could earn up to 5 April 2002. L G P S members were automatically contracted out of SERPS, and most paid lower national insurance contributions as a result. SERPS was replaced by the State Second Pension (S2P) from 6 April 2002 which, in turn, was replaced by the single tier State Pension from 6 April 2016.

State Pension Age

This is the earliest age you can receive the state basic pension. The State Pension Age increased to 66 for both men and women between December 2018 and October 2020.

Under current legislation, the State Pension Age is due to rise to 67 between 2026 and 2028 and to 68 between 2044 and 2046. The Government published the results of its most recent State Pension Age Review in April 2023. No changes to the State Pension Age time timetable were announced. However, the Government will review the State Pension Age timetable again within the first two years of the next Parliament.

To find out your State Pension Age, please visit www.gov.uk/state-pension-age.

State Second Pension (S2P)

The State Second Pension (formerly SERPS) is the additional state pension, payable to individuals from State Pension Age if they attained State Pension Age before 6 April 2016. Initially, S2P was an earnings-related pension but from April 2009 it began building up as a flat rate pension until 6 April 2016 when it was replaced with the new single tier State Pension. For information about the new State Pension see www.gov.uk/new-state-pension

Term of office

A term of office ends on the fourth day after the ordinary day of election of councillors. New terms of office commence on the same day as the old terms end.

Total membership

This is the amount of membership that counts, as detailed below, for:

Working out whether you are entitled to a benefit

• the number of years and days that you have been an LGPS member as a councillor or elected mayor.
• Working out the amount of your personal benefits

• the number of years and days that you have been an LGPS member as a councillor or elected mayor but excluding:
  •  any membership in respect of which you are already in receipt of a Local Government pension
  • in respect of which you hold a Local Government deferred pension which relates to an earlier period of membership of the Scheme as a councillor or elected mayor, or
  • in respect of any other earlier period of membership of the Scheme as a councillor or elected mayor which has not been aggregated with your current period of membership.
• any membership granted by way of ill health enhancement (see the Ill health retirement section).

Further information and disclaimer

This guide cannot cover every personal circumstance. It does not cover all ill health retirement benefits nor rights that apply to those whose rights are subject to a pension sharing order following divorce or dissolution of a civil partnership. Nor does it cover rights that apply to a limited number of members.

In the event of any dispute over your pension benefits the appropriate legislation will prevail. This guide does not confer any contractual or statutory rights and is provided for information purposes only.

More detailed information about LGPS Councillor is available from:

Phone: 01792 636655

Email: pensions@swansea.gov.uk

Address: City & County of Swansea Pension Fund, Guildhall, Swansea SA1 4PE

website: https://www.swanseapensionfund.org.uk

Please note that Swansea Council is the administrative authority of the City & County of Swansea Pension Fund and we use your personal data in accordance with Data Protection legislation to provide you with a pension administration service. For more information about how we use your data, who we share it with and what rights you have in relation to your data, please visit the Privacy Notice on our website.