Retirement

The Local Government Pension Scheme (LGPS) is known as a 'Defined Benefit (DB)' pension scheme (i.e. the way in which benefits are calculated is defined in legislation). 

If you have become a member since 1 April 2014

Since 1 April 2014 the benefits build up on a 'Career Average Revalued Earnings' (CARE) basis. This means that the pension you earn each year is based on your actual pensionable pay received in each Scheme year (1 April to 31 March) instead of being based on the pay you receive at the point you leave or retire from the Scheme.

Each Scheme year 1/49th of your actual pensionable pay will be added to your 'Pension Account'. Your pension account is then revalued in line with an inflationary increase (currently CPI) being added each year so that it keeps its value from the point the pension is earned to the point from which it becomes payable.

If you first joined the LGPS on or after 1 April 2014, your benefits will be calculated as follows:

Actual Pensionable Pay (received from 1 April to 31 March) ÷ 49 = Annual Pension income

Lump sum: NIL (but with an option to convert part of your pension into tax-free cash)

In addition, a pension will be paid to your surviving spouse, nominated cohabiting partner or civil partner if you die first.

Example

A member is in the MAIN section of the LGPS from 1 April 2022 to 31 March 2023. Their pensionable pay for 2022/2023 is £24,500 increasing to £25,333 in 2023/2024.

At the end of the scheme year, £500 is added to the member's Pension Account. To make sure the amount keeps its value, the total in the Pension Account is revalued in line with the cost of living. Inflation was applied at 10.1% from April 2023, therefore the £500 in the member's account at the end of the scheme year (31 March 2023) increased in April 2023 to £550.50.

The member remains in the Main section of the Scheme from 1 April 2023 to 31 March 2024 and earns £25,333 in that year.

An online calculator has been produced to help you understand how your pension is calculated under the CARE Scheme arrangement from 1 April 2014.

If you have become a member before 1 April 2014

If you became a member of the LGPS for the first time before 1 April 2014 your benefits up to 31 March 2014 will be based on a Final Pay formula and will be calculated depending on whether you joined the LGPS before or after 1 April 2008:

For membership from 1 April 2008 to 31 March 2014:

Annual Pension: Scheme Membership x Final Pay ÷ 60

Lump Sum: NIL (with an option to convert part of your pension into tax-free cash).

In addition a pension will be paid to your surviving spouse, nominated cohabiting partner or civil partner if you die first. This will be calculated as:

For membership prior to 1 April 2008:

Annual Pension: Scheme Membership x Final Pay ÷ 80

Lump Sum: Scheme Membership x Final Pay x 3 ÷ 80

In addition a pension will be paid to your surviving spouse or civil partner if you die first. This will be calculated as:

Example

A member has 16 years of membership, 10 years pre April 2008 and 6 years post March 2008 up to 31 March 2014. The member's final pay at 31 March 2014 is £20,000. Their benefits will be calculated as follows:

If you became a member before 1 April 2008 and leave after 31 March 2014

Now we will have look at an example of a member who has, pre April 2008, post April 2008 and post April 2014 membership:

A member joined the LGPS as a full-time employee on 1 April 1998. He leaves the LGPS on 31 March 2015. The member's final pay at 31 March 2015 is £24,000. Their pension will be calculated in three parts as follows:
 

Based on this example the member would be entitled to an Annual Pension of £5,889.80 and a Lump Sum Retirement Grant of £9,000. If they claim their benefits before their Normal Pension Age (NPA) these benefits would be reduced to cover the cost of the pension being release early.

Important: If you have left your employment and you wish to claim your pension before your Normal Pension Age (NPA) a three month written notice period is required. Please provide your notice to the pension team via email  - info@berkshirepensions.org.uk 

Converting Annual Pension into Additional Tax-Free Cash

It is possible to elect to convert part of your pension into additional tax-free cash. You are allowed to exchange £1 of pension for an additional £12 tax-free cash up to a maximum of 25% of the capital value of your total 'pension pot'. You will be provided with details of how this option applies to you before your benefits come into payment, as you will need to decide if you wish to convert any part of your pension into additional tax-free cash before that time.

You can use the Benefit Projector on your online account to calculate the maximum lump sum you could have. You can also use the lump sum calculator available on the national LGPS member website.