The 2014 LGPS includes an option that allows employees who are eligible to be members of the LGPS to choose to contribute half and receive half the benefits, rather than leaving the scheme entirely. This option must be renewed after a limited period of time and is not designed to replace long‑term membership of the main scheme.
How the 50/50 Option Works
The 50/50 option allows you to pay half your normal contribution rate and build up half your pension benefits during that period. You will still retain the full value of other benefits, such as the death‑in‑service lump sum.
You will need to complete an election form for the 50/50 option, and from the next pay period your contributions will be halved. No further election will be required unless you either wish to rejoin the main scheme or you are brought back into the main scheme under the automatic enrolment provisions (see below).
If you wish to complete an election for the 50/50 option, you should contact us to obtain a 50/50 option form, or you can print a copy from the Appendices section below.
Example 1
Ellen is repaying a loan and is finding things financially difficult, so she decides to elect for the 50/50 scheme for the remaining time she has the loan.
Her pensionable pay is £18,000 per year and she would normally contribute 5.8% (£87 per month before tax relief is applied) in the main scheme. While in the 50/50 option she contributes half this amount: 2.9% (£43.50 per month before tax relief).
As a result, she builds up pension benefits at an accrual rate of 1/98 (compared to 1/49 in the main scheme). If she remains in the 50/50 scheme for two years, she will build up an annual pension of £367. This amount will be added to Ellen’s pension in the main scheme.
While saving in the 50/50 scheme, she remains entitled to the full value of other scheme benefits. For example, her death‑in‑service lump sum would continue to be £54,000 (three times her pensionable pay).
Main Scheme
- Net contribution: £70 per month
- Pension built before revaluation: 1/49 = £367 per year
- Death‑in‑service lump sum: £54,000
50/50 Option
- Net contribution: £35 per month
- Pension built before revaluation: 1/98 = £184 per year
- Death‑in‑service lump sum: £54,000
Example 2
Roger’s partner has lost their job, and they are facing a difficult period until work can be found. Roger decides to choose the 50/50 scheme. Six months later, their financial situation returns to normal.
His pensionable pay is £55,000 per year, so during the six months of membership in the 50/50 scheme he paid contributions at a rate of 3.40% instead of 6.8%.
After tax relief, this reduced his contributions by a total of £561 during the 50/50 membership period. The pension built up in that year was reduced from 1/49 of £55,000 for the full year to six months at 1/49 and six months at 1/98 (from £1,122 to £842), while his death‑in‑service lump sum remained £165,000 throughout.
Main Scheme (6 months)
- Net contribution: £187 per month
- Pension built before revaluation: 1/49 × 0.5 (6 months) = £561
- Death‑in‑service lump sum: £165,000
50/50 Option (6 months)
- Net contribution: £93.50 per month
- Pension built before revaluation: 1/98 × 0.5 (6 months) = £281
- Death‑in‑service lump sum: £165,000
50/50 and Automatic Enrolment
The option is designed to provide a short‑term alternative for people who are considering leaving the scheme. It will operate alongside the automatic enrolment provisions being introduced, which will apply to all employers, not just those offering the LGPS.
Members who have chosen the 50/50 option will be automatically re‑enrolled into the main scheme on a regular basis in line with these provisions.