The Basics
✓ The LGPS is not an investment fund or pension pot
✓ A new amount is added each year based on your pensionable pay
✓ Your pension increases every year to help protect against inflation
✓ Benefits before 1 April 2014 are calculated differently
How does your pension work?
Since 1 April 2014, the LGPS has been a Career Average Revalued Earnings (CARE) scheme.
Each year, you build up a new pension based on your pensionable pay for that year.
The pension you build up is added to your pension account and is then revalued each year in line with an index set by the Government to help protect its value against inflation.
Example of how a CARE pension builds up
In the LGPS, you build up 1/49 of your pensionable pay each year. For example, if your pensionable pay is £24,500, you will build up £500 of annual pension (£24,500 ÷ 49).
The table below shows how a CARE pension builds up over three years and how revaluation increases the pension that has already been built up.
| Year | Pensionable pay | CARE calculation | Pension built up | Revaluation | Total pension account |
|---|---|---|---|---|---|
| 2014/15 | £24,500 | £24,500 ÷ 49 | £500.00 per year | +1.2% | £506.00 per year |
| 2015/16 | £24,745 | £24,745 ÷ 49 | £505.00 per year | -0.1% | £1,009.99 per year |
| 2016/17 | £24,992.45 | £24,992.45 ÷ 49 | £510.05 per year | +1.0% | £1,535.24 per year |
At the end of the third year, the member has built up £1,535.24 per year. This is not a lump sum or a pension "pot". It is an annual pension that will be paid for life when you retire.
What if I was a member before 1 April 2014?
Before 1 April 2014, the LGPS was a final salary scheme.
- For service built up between 1 April 2008 and 31 March 2014, each year of membership built up a pension of 1/60 of your final pay.
- For service built up before 1 April 2008, each year of membership built up a pension of 1/80 of your final pay together with an automatic lump sum of three times your pension.
If you worked part-time, the service built up would be adjusted to reflect your working hours.
Any final salary benefits you built up before 1 April 2014 will be protected and paid alongside your CARE benefits.
Example of how final salary benefits are calculated
In this example:
- Final pensionable pay: £30,000
- 8 years of membership before 1 April 2008
- 6 years of membership between 1 April 2008 and 31 March 2014
8 ÷ 80 × £30,000
= £3,000 pension per year
3 × £3,000
= £9,000 lump sum
6 ÷ 60 × £30,000
= £3,000 pension per year
Annual pension: £6,000 per year
Automatic lump sum: £9,000
These benefits would be paid alongside any CARE benefits built up after 1 April 2014.
Related Topics
McCloud Remedy
How the McCloud Remedy may affect your LGPS benefits and what it means for your pension when you retire.