When you retire, for service up to 31 March 2009, you will receive a tax-free lump sum from the Local Government Pension Scheme, followed by regular pension payments. For service after 1 April 2009 you will receive a pension, part of which can be taken as tax free cash. If you’ve paid enough National Insurance contributions over your working life, you’ll also receive the basic State Pension.
You can use this site’s benefit calculator to work out your pension benefits for service up to 31 March 2009. The calculator can only give you an estimate, as everyone’s situation is different. A Guide to the Local Government Pension Scheme will help you to work out your benefits.
Benefit statement
Every year you will receive a benefit statement, which sets out what you’ll be due if you retire immediately, and at retiring age. Going part-time, getting a pay rise, retiring early and many other factors can affect what you’ll finally get. Refer to A Guide to the Local Government Pension Scheme for more information.
How is your pension calculated?
Your pension is based on how long you’ve been a member of the scheme and your final pay. The final amount may change if you retire early or put off retiring, or if you choose to have a bigger lump sum when you retire.
For most people, for service up to 31 March 2009, the annual pension payment is worked out by dividing your final pay by 80 (60 for service after 31 March 2009) and multiplying this by your total membership.
If you’ve been working part time, the total membership is reduced in proportion to the hours worked, while your final pay is scaled up to the full time equivalent. For example, if you’ve worked 30 years at exactly half time, and your final pay is £8,100, then for the sake of the calculation your total membership is considered to be 15 years and your final salary is considered to be £16,200.
When you’ve retired - unless you retire early - your pension will increase every year in line with rises in the cost of living.
How is your lump-sum payment calculated?
The lump sum, which is automatically paid when you retire for service up to 31 March 2009, is three times your annual pension and is tax-free. To work out your lump sum, divide your final salary by 80, multiply this by your total membership, and then multiply the final figure by 3. If you’ve been working part time, your total membership is reduced in proportion to the hours worked and your final pay is scaled up to the full time equivalent, as above.
From 6 October 2006 you have been able to choose to reduce your annual pension in order to get a bigger lump sum. For every £1 you take off your annual pension, you increase your lump sum by £12.
This isn’t for everyone, because you will have less to live on each year unless you invest your lump sum in a way which gives you a regular income. Remember that you can get free independent financial advice relating to your pension if you are part of the scheme.
Example pension and lump sum calculation
When retiring at age 65 on 1 Feb 2009, a scheme member has 30 years and 73 days (73/365 days = 0.2 years + 30 years = 30.2 years) total membership and has a final pay of £16,200.
The annual pension is therefore:
£16,200 / 80 = 202.5
202.5 x 30.2 = £6115.50
The lump sum is:
£16,200 / 80 = 202.5
202.5 x 30.2 = 6115.5
6115.5 x 3 = £18,346.50
More information
You can download A Guide to the Local Government Pension Scheme, with full details of all aspects of the scheme and how to take advantage of them, to print out and read when you want. If you would rather receive a copy by post, contact us.
If you’ve got further questions, visit the employee member frequently asked questions page of this site.