Local government
For most people, the retirement process will take at least two months. So, if you want to avoid any unnecessary delays, it pays to plan ahead. The information on this page will help you get started.
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Are you ready to retire?
As a member of a local government pension scheme (LGPS), you may be able to start taking your pension from the age of 55. But before you make any decisions, it’s important to understand the rules and the application process.
When can I retire?
The date your benefits can be paid without reductions is called your Normal Pension Age (NPA). This date will be different depending on when you stopped paying in to your scheme. If you stopped paying in after 1 April 2014, it will be the same as your state pension age, but if you stopped paying in before this it is age 65.
Once you’ve completed your scheme vesting period (two years), you can retire and take your pension at any time between the ages of 55 and 75. Just be aware that the value of your benefits will vary depending on when you retire. Plus, there are exceptions for things like redundancy and ill health retirement, so it’s worth checking your pension scheme guide before making your final decision.
What benefits will I get?
When you retire, you’ll receive the following benefits:
- An annual pension income
- A tax-free lump sum option (or automatic lump sum if you joined before 1 April 2008)
- Financial benefits for the people you care about in the event of your death
The value of the benefits depends on when you joined the scheme.
It depends on the lifestyle you want to achieve and how much it’s realistically going to cost. Alongside everyday expenses, this could involve things like travel, home improvements and hobbies.
As well as working out your monthly pension, be sure to consider any additional sources of income, such as savings, investments and rental properties. But remember, your state pension won’t kick in until you’re at State Pension Age, so if you’re hoping to retire early, you’re going to need a plan B.
If you’re wondering how much money you’ll need to enjoy a comfortable retirement, you might find The Retirement Living Standards web pages useful. They have been put together by The Pensions and Lifetime Savings Association (PLSA) to help people plan ahead for retirement – based on independent research by Loughborough University.
Visit Retirement Living Standards website Link opens in a new windowHow are my benefits calculated?
Your Local Government Pension Scheme (LGPS) benefits are worked out based on your pay, membership type and contributions since joining the scheme. The benefits are also adjusted annually to bring them in line with inflation.
During this period, the LGPS operated as a final salary scheme.
- Your pension benefits are calculated based on 1/80th of your final pay for each year of membership (or your ‘full-time equivalent’ pay if part time).
- You are also entitled to an automatic lump sum equal to three times your annual pension.
- You can choose to increase your automatic lump sum up to 25 per cent of your pension benefits (across all your pension schemes). For every £1 of annual income you give up, you would receive an additional £12 in your lump sum.
The highest pay figure from the last three years of employment is used for the above calculation.
During this period, the LGPS operated as a final salary scheme.
- Your pension benefits are calculated based on 1/60th of your final pay for each year of membership (or your ‘full-time equivalent’ pay if part time).
- You are not entitled to an automatic lump sum during this period, but you have the option of converting up to 25 per cent of your pension benefits (across all your pension schemes) into a tax-free lump sum. For every £1 of annual income you give up, you would receive £12 in your lump sum.
The highest pay figure from the last three years of employment is used for the above calculation. Or, if it’s higher, the average of the best consecutive 3 years in the last 13 years of employment (after inflation adjustments).
On 1 April 2014, the LGPS became a Career Average Revalued Earnings (CARE) scheme.
- Each year, 1/49th of your pensionable pay is added to your pension account (or 1/98th if you are a member of the 50/50 section).
- The balance in your pension account is adjusted annually to match inflation.
- If you have multiple jobs, you’ll have separate pension accounts for each employment.
- You are not entitled to an automatic lump sum, but you have the option of converting up to 25 per cent of your pension benefits (across all your pension schemes) into a tax-free lump sum. For every £1 of annual income you give up, you would receive £12 in your lump sum.
In some situations, your employer may put protections in place to make sure your pension is not adversely affected by pay reductions.
The protections work in one of two ways. By taking your highest pay figure from the last three years of employment to calculate your Assumed Pensionable Pay (APP). Or, if it’s higher, by taking the average of the best consecutive three years in the last 13 years of employment (after inflation adjustments).
Examples of when pay protection may apply
- Your pay was reduced to ensure equal pay in relation to other employees of your employer.
- Your pay was reduced as a result of a job evaluation exercise.
- Your pay was reduced due to a change in your employment contract and payments or benefits (specified as pensionable emoluments) either ceased, reduce or were restricted.
- The rate at which your pay increased was restricted in a way that adversely affected your retirement pension.
Examples of when pay protection may not apply
- The reduction started more than 10 years before your last day as an active member (paying into the pension scheme).
- The reduction immediately followed the end of a temporary post on a higher rate of pay.
- The reduction was a choice made for the purpose of taking flexible retirement.
If your pay has been reduced due to sickness, the final pay figure used to calculate your pension is the pay you would have received had you not been sick.
Likewise, to prevent pension loss, an Assumed Pensionable Pay (APP) figure is used. This notional pay ensures that your pension benefits continue to accumulate as if you were working normally. The APP is calculated based on your average pensionable pay in the three months before any pay reduction.
Get an up-to-date estimate of your pension benefits by logging in to PensionPoint (your secure online portal) and visiting the online calculator page.
Full details on how your benefits are calculated are also available in the LGPS scheme guide, which is available to download on our Forms, documents and scheme information page.
How do I retire?
Follow the steps below to find out how you can retire.
If you are still paying into your pension scheme (an active member):
- It’s important to notify your employer that you intend to retire at least two months before you intend to finish your employment – or at least three months if you have additional voluntary contributions (AVCs).
- It’s important to know that if you are currently paying AVCs, it can delay the payment of your benefits by up to two months. This is because we are unable to pay your pension until we have had confirmation from your AVC provider that your AVC has been paid.
- If you have an AVC, it’s wise to seek financial advice before-hand either from an independent financial advisor (IFA) or PensionWise (a free, government service).
- Once you’ve told your HR department that you intend to retire, it’s up to your employer to notify LPPA. We can’t start your retirement application until we receive an employer leaver form, which includes confirmation of your pay information.
If you are no longer paying into your pension scheme (a deferred member):
- Try to let us know at least two months before you want to start taking your pension.
- You can get in touch with us via our online contact form
- Once we’ve been notified that you intend to retire, we’ll send you a retirement pack in the post with the necessary forms to complete. There are usually two forms, but if you’re being made redundant, there’s just one (the Member retirement form) or if you have an AVC there are three additional forms (so five in total).
- Return your completed forms to LPPA, along with any additional documents that have been requested. Be sure to read the forms carefully because if they are returned to us with any gaps or without the necessary signatures, it can delay your application.
- The easiest way to return the forms is via our online contact form – just take a picture (or scan them) and you can upload them via your phone or computer.
- If you are a member of Havering, Hertfordshire or Newham Pension Fund, you may have the option to complete your retirement forms online. If you’re eligible, we’ll send you an email about this (once we know you intend to retire), which explains the process and includes a link that directs you to the form.
- After receiving your completed forms, we review the content and if we require any additional information, we drop you an email explaining exactly what we need.
- The sooner you respond to our request, the sooner we can process your application. Remember, you can send us any additional forms or information via our online contact form
- Once we have all the information we need, we run your retirement calculations and get everything set up ready to pay your pension.
- Once we’ve prepared your paperwork, we send you a retirement payment letter with confirmation of your retirement benefits and payment dates.
- Check this document carefully, as it includes the final details of your pension.
- You should get in touch with us immediately if anything doesn’t look right. But if you’re happy with your benefit details, there’s nothing further you need to do.
- Remember, if you have taken out an AVC, we can’t pay your benefits until your AVC provider releases your funds.
- You will then receive your pension lump sum payment (if you have requested one).
- And then your first monthly pension payment.
- Please be aware that the date you receive your payments depends on the payroll date of your pension fund. If you have missed the current month’s cut off date, you may be paid the following month – but any backdated pension will be included in your first payment.
- If you have any questions about tax on your pension, please contact HMRC directly.
What if I have an AVC?
An AVC (Additional Voluntary Contributions) plan is an arrangement that allows you to build up a separate pot of money with a separate provider alongside your LGPS pension.
When deciding how to use your AVC at retirement, there is a range of options to choose from including a tax-free lump sum. Visit our AVC page to learn more about your options and when you can take out an AVC.
If you paid into the LGPS on or after 1 April 2014, you must withdraw your AVC (disinvest) at the same time as your main LGPS benefits.
LPPA cannot pay your LGPS pension until your AVC has been paid. This may delay the payment of your main scheme benefits.
This can happen because:
- If you are still contributing to your AVC fund until retirement, your AVC provider must wait to receive your final monthly contribution from your employer. They can then withdraw your funds and send them to us.
- We must pay your AVC funds and main scheme benefits at the same time. If there is a delay in your AVC provider withdrawing and sending the payment to us, your main LGPS benefits will be delayed.
Important
Deciding what to do with your AVC is an important financial decision. The LGPS recommends that you get financial guidance from Pension Wise – a free, government service from MoneyHelper that offer impartial advice to help you understand your AVC options.
What is the process of withdrawing my AVC?
- Once we receive notification of your retirement, we contact your AVC provider to get a quote and ask them to disinvest your AVC on your chosen date – usually your retirement date.
- If we have all the information we need, we send the request to your provider before your retirement date to help avoid delays to your pension.
- Your AVC provider stops investing your AVC on the date requested and usually sends the money to your pension fund (but you may receive this directly, depending on your fund).
- Your pension fund lets us know when they have received your AVC money (or your AVC provider lets us know if they’ve sent you the money directly).
- We process your main LGPS pension payments and include the AVC value in your lump sum payment (if this is what you requested).
- Remember, there are different ways you can take your AVC depending on your circumstances. Visit our AVC page for more information.
Frequently asked questions
For more information on planning your retirement and your pension finances, visit the LPPA HelpHub
