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Created: 24 March 2015 | Last Updated: 29 October 2015 | Printer Friendly Version Printer Friendly Version | Make Text Smaller Make Text Larger |

Local Government Pension Scheme 2015

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Background

A number of EIS members will be members of the Local Government Pension Scheme. This includes most Instrumental Music Teachers, some Education Officers and Educational Psychologists and a small number of Further Education members.

Following the Independent Review of Public Sector Pensions in 2011, the UK Government brought forward changes to all public sector pension schemes, designed to make such schemes "sustainable, affordable and fair”.

The Public Sector Pensions Act 2013 sets out the age at which members of public sector schemes can access their benefits. The age at which members of the Local Government Pension Scheme (LGPS) can retire in future will be directly linked to their State Pension Age (SPA).

Agreement was reached by the Scottish Local Government Pension Advisory Group (SLOGPAG) on the content and operation of the new Local Government Pension Scheme in Scotland (LGPS 2015).

The current LGPS scheme will close on 31 March 2015. All members of the current scheme will transfer to the new LGPS 2015 on the 1 April 2015. Unlike the changes to the Scottish Teachers Superannuation Scheme (STSS) there will be no "transitional” or "tapered” protection.

However, those who were members of the scheme and aged 55 or over on the 1 April 2012 will have a guarantee that at retirement their benefits will be no worse than those they would have received had they remained in the pre-April 2015 scheme.

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The main features of LGPS 2015 are:-

  • A defined benefit Career Average Revalued Earnings (CARE) scheme
  • Normal pension age aligned with State Pension Age or age 65 whichever is higher
  • Benefits accrued to 31 March 2015 will continue to be linked to final salary
  • An accrual rate of 1/49. The accrual rate is the rate by which pension grows annually and is index linked by the Consumer Price Index
  • There will be a 50/50 option. To encourage members to remain in a pension scheme there is an option to contribute 50% of the normal contribution rate and receive 50% of the benefits
  • Tiered contributions will continue to apply but based on your actual earnings rather than your full time equivalent salary.
  • See Appendix 1 for the 2015/16 contribution rates

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Frequently Asked Questions

When can I retire?

You will be able to voluntarily retire at any age on or after your 60th birthday. However, if you retire before your Normal Pension Age (which is equal to your State Pension Age in the LGPS 2015 – with a minimum of age 65) your pension will be reduced. If you retire after your Normal Pension Age your pension will be increased.

There is no compulsory retirement age in the LGPS.

You can find out what your State Pension Age is by using the Government’s calculator: www.gov.uk/calculate-state-pension

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I am within 10 years of retirement - do I get any protection? Other schemes appear to have transitional arrangements. 

Yes, protection is in place if you are nearing retirement. This ensures that you will get a pension at least equal to that which you would have received in the scheme had it not changed on 1 April 2015. This protection is known as the "underpin”.

The "underpin” applies to you if you were:-

  • paying into the Scheme on 31 March 2012 and you were within 10 years of your Normal Pension Age on 1 April 2012
  • you have not had a disqualifying break in service of more than 5 years
  • you have not drawn any benefits in the LGPS before Normal Pension Age, and
  • you leave with an immediate entitlement to benefits.

The references in this "underpin” section to Normal Pension Age are to your protected Normal Pension Age under the 2009 scheme – normally age 65.

If you are covered by the "underpin” a calculation will be made at the date you cease to contribute to the Scheme, or at your Normal Pension Age if earlier, to check that the pension you have built up (or, if you have been in the 50/50 section at any time, the pension you would have built up had you always been in the main section of the scheme) is at least equal to that which you would have received had the scheme not changed on 1 April 2015. If it is not, the difference will be added to your pension.

  • You should note that if you "opt out” of the Scheme before your Normal Pension Age, the "underpin” will not apply. If you are covered by the "underpin”, your Pension Fund will carry out the check when you leave the Scheme.
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If I retired early what sort of reduction would apply?

The amount of the reduction has yet to be agreed but please see the proposed reduction table below:-

Years Early Pension Male Pension Female

Lump Sum

(for membership to 31 March 2009)

 1  6%  6%  3%
 2  11%  11%  6%
 3  16%  15%  8%
 4  21%  20%  11%
 5  25%  24%  14%
 6  29%  28%  16%
 7  33%  31%  19%
 8  36%  35%  21%
 9  39%  38%  23%
 10  42%  41%  26%

(There is no automatic lump sum for scheme membership after 1 April 2009.)

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I cannot afford to stay in the LGPS, is there any alternative to opting out?

Yes, there is a 50/50 option in the LGPS 2015. This means that you can pay half your contribution rate and build up half the benefit. However, you retain the full value of other scheme benefits such as death in service lump sum and ill health cover.

50/50 allows flexibility in times of financial hardship. It is designed to be a short-term measure. Every three years you will be re-enrolled into the main section of the Scheme. If you wish to remain in the 50/50 option you need to reapply.

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Can I do anything to increase my benefits at retirement?

Yes, you will be able to pay extra to increase your pension either by purchasing Additional Pension Contributions (APC) to buy an increased LGPS pension or by making payments to the LGPS’s Additional Voluntary Contributions (AVC) arrangement.

You can purchase APC up to a maximum of £6,500. This can be done either by monthly deductions from your salary or by lump sum. APC does not count towards dependants benefits.

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I have missing periods of service. Can I do anything about this?

Yes, there is now a shared cost Additional Pension Contribution (APC) option. This means you can buy back periods of unpaid additional maternity, paternity and adoption leave. You can also buy periods of unpaid authorised leave of absence.

You need to elect to do so within 30 days of returning to work. Your employer pays 2/3rds of the cost you pay 1/3rd.

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I think I will have service in three different schemes. How will my pension be calculated?

Each period of your service will be calculated separately and added together.

  • Calculation 1 – Service up to 31 March 2009
    • Annual Pension = Pensionable Service x Pensionable Salary/80
    • Lump Sum = 3 x Annual Pension
  • Calculation 2 – Service from 1 April 2009 to 31 March 2015
    • Annual Pension = Pensionable Service x Pensionable Salary/60
    • (There is no automatic lump sum.)
  • Calculation 3 – Service from 1 April 2015
    • Your LGPS 2015 pension will be calculated on the basis of a revalued annual pension built up by 1/49th of your pensionable pay in each year. Revaluation will be by the Consumer Price Index.
    • The three amounts will be added together to form your total LGPS pension.
    • Please note you cannot take your benefits built up to April 2015 separately from the benefits you build up from April 2015. All of your pension would have to be drawn at the same time if retiring voluntarily.
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What happens to my pre-2015 final salary service?

Pension you have built up prior to 1 April 2105 is fully protected and benefits will be based on your final salary at retirement.

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What happens if I retire after my State Pension Age?

If you work after this date you pension will be enhanced. Figures have yet to be agreed but it is likely to be in the region of 0.02% per day (7.3% per annum).

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What other Retirement Options are there?

The current provisions for retiring on the grounds of ill health, efficiency or redundancy are the same in the new scheme. However, ill health enhancement will be to your state pension age if it is higher than your normal pension age.

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What is the "rule of 85" and will I still be able to access this?

The "rule of 85" is met if your age at the date you draw your benefits and your scheme membership (each in whole years) add up to 85 or more.

However, to have "rule of 85” protection you must have been a member of the scheme on 30 November 2006. (The rule was removed at this time to satisfy age discrimination laws but some "transitional” protection was agreed.)

If you would not satisfy the "rule of 85” by the time you are 65, then all your benefits are reduced if you choose to retire before 65. The reduction will be based on how many years before 65 you draw your benefits.

  • If you will be age 60 or over by 31 March 2020 and choose to retire before age 65, then, provided you satisfy the 85 year rule when you start to draw your pension, the benefits you build up to 31 March 2020 will not be reduced.
  • If you will be under age 60 by 31 March 2020 and choose to retire before age 65, then, provided you satisfy the 85 year rule when you start to draw your pension, the benefits you have built up to 31 March 2008 will not be reduced.
  • If you are part-time, your membership counts towards the rule of 85 at its full calendar length. Not all membership may count towards working out whether you meet the 85 year rule. Working out how you are affected by the 85 year rule is complicated but the following flow chart may be of assistance. Please click here to download a higher resolution image of the chart. 

 

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5 year final salary link

If you leave the Scheme before being able to immediately draw your pension and you have sufficient membership to have built up a pension entitlement you will be awarded deferred benefits which remain in the scheme (unless you elect to transfer them to another pension scheme).

If you are automatically moved to the career average scheme on 1 April 2015, subsequently cease membership with entitlement to a deferred benefit and then rejoin the scheme at a later date, provided you do not have a break in membership of more than 5 years from any public service pension scheme, your final salary benefits will be linked to your new pension account and will be calculated on your final salary in your new employment when you leave.

You can elect to keep your benefits separate but you would need to notify your Pension Fund of this within 12 months of rejoining the scheme.

A public service pension scheme includes a pension scheme covering civil servants, the judiciary, the armed forces, any scheme in England, Wales or Scotland covering local government workers, or teachers, or health service workers, or fire and rescue workers or members of the police forces; or membership of a new public body pension scheme.

If the break in membership from public service pension schemes is more than 5 years then any final salary benefits in the LGPS are transferred across to the career average scheme unless you choose to retain them as separate final salary benefits.

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Appendix 1

Rate of pay on 01/04/15  Contribution Rates 2015/2016
Up to and including £21,102  5.5%
Between £21,103 and £27,397  Between 5.6% and 6.0%
Between £27,398 and £34,415  Between 6.1% and 6.5%
Between £34,416 and £48,544  Between 6.6% and 7.5%
Between £48,545 and £54,689  Between 7.6% and 8.0%
Between £54,690 and £73,228  Between 8.1% and 9.0%
Between £73,229 and £110,782  Between 9.1% and 10.0%
More than £110,783  10.1% and over

 

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