Question 1

What are the three sections of the LGPS?

Accepted Answer

The Local Government Pension Scheme (LGPS) in England and Wales has three sections: the pre-2008 scheme (final salary, 1/80 accrual, normal pension age 65, with an automatic 3/80 lump sum); the 2008 scheme (final salary, 1/60 accrual, normal pension age 65); and the 2014 scheme (Career Average Revalued Earnings, 1/49 accrual, normal pension age equal to state pension age). All current LGPS members are accruing benefits in the 2014 CARE scheme. Anyone with service before 2014 may have additional benefits in one or both of the legacy final salary sections.

Question 2

How is the LGPS 2014 CARE scheme calculated?

Accepted Answer

The 2014 LGPS scheme is a Career Average Revalued Earnings (CARE) scheme. Each year you accrue 1/49 of your pensionable pay for that year. Each year's accrual is then revalued annually by CPI while you remain an active member. Note that LGPS uses CPI only — unlike the NHS or Teachers' schemes, there is no +1.5% statutory uplift. So if you earn £30,000 in year one, you accrue £612.24 of annual pension that then grows in line with CPI each subsequent year you stay in the scheme. The 1/49 accrual rate is more generous than the NHS 2015 (1/54) or Teachers' (1/57) CARE schemes.

Question 3

What is the LGPS underpin and how is it different from McCloud?

Accepted Answer

The LGPS handles the McCloud judgement through a statutory underpin rather than a member choice. In the NHS and Teachers' schemes, eligible members get a one-time choice at retirement between legacy and reformed scheme benefits for the remedy period. In LGPS, the underpin is applied automatically by your administering authority — there is no choice and you don't need to apply for it. The underpin guarantees that your benefits will be at least what you would have received under the final salary scheme. If the final salary calculation gives a higher figure for your protected period, the difference is added on. Members who were active in the LGPS pre-1 April 2012 and within 10 years of normal pension age on that date originally had underpin protection; the post-McCloud extension widens eligibility to anyone with relevant remedy-period service.

Question 4

Should I transfer my LGPS pension out to a SIPP?

Accepted Answer

Almost certainly not. The LGPS is one of the most generous defined benefit pension schemes in the UK, with employer contributions typically several times what an equivalent private sector worker receives. Transferring out means giving up a guaranteed inflation-linked income for life, plus spouse and dependant benefits, in exchange for a pot of money you would have to manage yourself with no guarantees. UK regulators presume that DB-to-DC transfers are not in members' best interests, and transfers above £30,000 legally require advice from a regulated pension transfer specialist. We do not provide transfer advice. If you are seriously considering a transfer, the right next step is a conversation with an FCA-authorised independent financial adviser holding the pension transfer specialist qualification.

Question 5

Can I take my LGPS pension early?

Accepted Answer

Yes, LGPS members can normally take their pension from age 55 (rising to 57 from April 2028 in line with the HMRC normal minimum pension age), but it will be reduced for early payment. The actuarial reduction is roughly 5% for each year you take it before your normal pension age, though the exact figures vary by age. There are two important exceptions worth knowing about. First, the Rule of 85: members with LGPS service before 1 October 2006 may have protection allowing them to take their pension from age 60 without reduction if their age plus service equals or exceeds 85. Second, the LGPS underpin guarantees that members with mixed service get at least their final salary scheme entitlement. Both of these are individual to your service history — your administering authority will apply them automatically at retirement, but if you want to know in advance, ask your fund for a quote.

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