One of the UK’s most generous pension plans is the LGPS. The LGPS is a defined benefit plan that is tied to salaries and is unaffected by changes in the stock market or the performance of investments.
The Local Government Pension Scheme (LGPS) is one of the largest pension schemes in the UK, offering valuable retirement benefits to employees in local government and other public service organizations. This guide provides an overview of the LGPS, covering its key features, benefits, contribution rates, and other important information for those considering joining the scheme.
Why Join the LGPS?
The LGPS offers several compelling reasons to join:
- Financial Security: The LGPS provides a secure and guaranteed income in retirement, backed by the government. This ensures financial stability and peace of mind during your golden years.
- Career Average Scheme: Your pension benefits are based on your earnings in each individual year, not just your final salary. This allows you to build a larger pension even if your income fluctuates throughout your career.
- Cost-Effective Contributions: Your employer contributes significantly to your pension, reducing the financial burden on you. Additionally, you receive tax relief on your contributions, further enhancing the scheme’s value.
- Protection for Your Family: The LGPS provides valuable protection for your family in the event of your death. Your spouse, civil partner, or dependents may be eligible for survivor benefits, ensuring their financial security.
Who Can Join the LGPS?
To be eligible for the LGPS, you must:
- Be under age 75.
- Work for an employer that offers membership in the scheme.
The LGPS is available to employees of local government organizations, as well as other public service providers in England and Wales. If you work for a town/parish council, charity, or private company participating in the LGPS, you may be eligible to join if your employer nominates you.
Membership and Contribution Rates
Membership in the LGPS is automatic for permanent employees. However, employees with contracts of less than three months may need to opt in to join the scheme. You can check your employment contract for details or contact your employer’s HR department.
Your contribution rate to the LGPS is determined by your employer based on your earnings. The rates vary depending on your salary band and may change throughout the year if your income fluctuates significantly. The contribution rates for 2024/2025 are as follows:
| Actual Pensionable Pay for an Employment | Contribution Rate for That Employment |
|---|---|
| Main Section | 50/50 Section |
| Up to £17,600 | 5.50% |
| £17,601 to £27,600 | 5.80% |
| £27,601 to £44,900 | 6.50% |
| £44,901 to £56,800 | 6.80% |
| £56,801 to £79,700 | 8.50% |
| £79,701 to £112,900 | 9.90% |
| £112,901 to £133,100 | 10.50% |
| £133,101 to £199,700 | 11.40% |
| £199,701 or more | 12.50% |
Benefits of the LGPS
The LGPS offers several valuable benefits to its members:
- Guaranteed Pension: You receive a guaranteed pension income upon retirement, calculated as 1/49th of your pensionable pay for each year of membership.
- Cost-of-Living Adjustments: Your pension is adjusted annually to keep pace with inflation, ensuring its purchasing power remains stable throughout your retirement.
- Lump Sum Option: You have the option to convert a portion of your pension into a tax-free lump sum, providing you with additional financial flexibility.
- Death Benefits: In the event of your death, your spouse, civil partner, or dependents may be eligible for survivor benefits, providing financial support for your loved ones.
Opting Out of the LGPS
While the LGPS offers significant benefits, you have the option to opt out of the scheme at any time. However, before making this decision, it’s crucial to consider the potential consequences:
- Reduced Pension: Opting out means you will no longer accumulate pension benefits, potentially leading to a smaller retirement income.
- Loss of Tax Relief: You will no longer receive tax relief on your contributions, increasing your tax liability.
- Loss of Family Protection: Opting out means you will lose the valuable death benefits that the LGPS provides for your family.
The LGPS is a highly advantageous pension scheme that offers financial security, guaranteed income, and valuable benefits to its members. If you are eligible to join the scheme, it’s worth considering the long-term benefits it provides for your retirement and the financial protection it offers for your family. Before making any decisions, carefully review the scheme’s details and consult with a financial advisor if necessary.
One of the UK’s most generous pension plans is the LGPS. The LGPS is a defined benefit plan that is tied to salaries and is unaffected by changes in the stock market or the performance of investments.
The coworker who serves as your primary Greater Manchester Pension Fund (GMPF) pension liaison officer can provide you with access if you do not have login credentials. You can get in touch with our GMPF Employer Support team for more assistance.
In short, your pension from your local government ensures that you will receive an annual pension payment when you retire. To fulfill this promise, your employer contributes a sizeable sum to the program as well. Please visit How do pensions and the LGPS work for more information.
It’s crucial to assess whether and how the economy, inflation, and investment returns are affecting your savings and finances when they start to decline.
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It will please you to know that, as a participant in the Local Government Pension Scheme (LGPS), any such modifications have no bearing on your pension benefits. Known as a defined benefit pension plan, the LGPS In these schemes, your pension is determined by a formula outlined in the scheme regulations rather than by the performance of your investments.
Understanding the LGPS – AVC Wise
FAQ
How good is a local authority pension?
Which company pays the best pension?
|
Organisation
|
Employer Pension Contribution
|
Optimum employee contribution rate
|
|
Teachers
|
16.5pc
|
10.20pc
|
|
Nationwide Building Society
|
13-16pc
|
4pc to get 13pc; 7pc to get 16pc
|
|
Lloyds Banking Group
|
up to 15pc
|
6pc to get 15pc from employer
|
|
Autoglass
|
10%
|
5pc to get 10pc employer
|
How safe is my local government pension?
Are government pensions safe?
Why are public pensions important?
Public pensions are especially important for the 28 percent of state and local government workers not covered by Social Security. Social Security originally excluded state and local government employees because of constitutionality concerns over levying a federal payroll tax on states and local governments.
How many local government pension plans are there?
Almost 60 percent of local government pension contributions went to state-administered rather than local-administered plans in 2017. Florida and Hawaii had one state-administered plan in 2017, while Massachusetts had the most with 14 plans. For locally administered plans, six states had no local plans in 2017 and eight states had more than 100.
Are local government pension plans state-administered?
However, most plan members (90 percent) and assets (82 percent) are in state-administered systems, in part because many local government employees are covered by state plans. Almost 60 percent of local government pension contributions went to state-administered rather than local-administered plans in 2017.
How important are state and local government pensions?
State and local government pensions are important to overall national savings, accounting for 19 percent of total retirement saving assets. By comparison, individual retirement accounts, such as 401 (k)s, account for 28 percent of assets.