LGPS 2014

In March 2011, Lord Hutton published his report into public service pension provision which set out recommendations for the Government on how to ensure public service pensions were sustainable and affordable in the long term. This was the start of a process which will introduce, in the case of the Local Government Pension Scheme (LGPS) a new Career Average Scheme from 1 April 2014.

How does LGPS 2014 work?

Individuals who are already paying into the Local Government Pension Scheme (LGPS) were automatically enrolled into the new scheme from 1 April 2014.

From April 2014 pension benefits build up in a new way. While LGPS 2014 will remain a defined benefit scheme where benefits accrue based on an individual members salary the formula for calculating the pension will change:

  • For each year in the new scheme, a member will build up a pension based on their pensionable pay in that year.
  • For each scheme year that an individual is a member of the scheme a pension equal to a 49th of your pensionable pay will be added to their pension account.
  • Inflation increases will be added to ensure that your pension account keeps up with the cost of living.

Normal Pension Ages will be linked to the State Pension Age for those benefits that are built up from April 2014 onwards.

From April 2014 there is a new option in the scheme called ‘50/50’. An individual member can elect for this option at any time and pay half their normal contributions and build up half their normal pension.

How does 50/50 work?

There are two sections in the scheme from 1 April 2014 – the main section and the 50/50 section. All members will automatically join the main section of the Scheme and will pay normal contributions to build up pension benefits up in the normal way.

The 50/50 section is a new option. An individual member will be able to elect to move to this section if they wish and in doing so will then pay half contributions but only building up half their normal pension. Members continue to receive full life assurance cover regardless of what section they are in.

Who can elect for 50/50?

Any member can elect to pay into the 50/50 section at any time. An election to join this section must be made in writing to the respective employer.

How long can someone remain in the 50/50 section?

The 50/50 section is designed to be a short-term option for when times are tough financially. Because of this employers are required to re-enrol staff back into the main section of the scheme every three years. This will be carried out in line with the relevant automatic re-enrolment date. Employers will need to inform staff of their automatic re-enrolment date if they’re in the 50/50 section of the scheme. Where a member wishes to continue in the 50/50 section they will need to make another election to remain in that section.

An individual member can choose to revert back to the main section of the scheme at any time by informing their employer in writing. They will then start to build up full benefits in the main section from their next available pay period.

Where a member in the 50/50 section moves into a period of no pay due to sickness or injury, they will be moved back into the main section of the Scheme from their next available pay period, if they are still not receiving pay at that time.