Pension basics
Learn about saving for retirement with your LPPA pensions.
Contents
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Understanding your pension
This is a type of workplace pension, which you get through your employer. Defined benefit means you’ll get a guaranteed pension income when you retire – this is a secure income for life, which is protected against inflation.
The pension is set up by your employer. Money is then taken out of your salary to pay for your pension and your employer contributes too. These combined contributions are used to pay for your guaranteed package of benefits.
A DBS promises you a specifically defined income for life, which can increase each year in line with inflation. The amount you get is based on how many years you’ve been a scheme member and the salary you’ve earnt up until the point when you leave or retire.
A DCS allows you to build up a pot of money that your pension provider puts into investments (such as shares), which you can use to fund your retirement income. The amount you get depends on factors such as what you pay in and how well these investments perform.
A CARE pension (Career Average Revalued Earnings pension) is a new type of pension scheme that was set up in 2014 (2015 for Police and Firefighter schemes). It allocates a percentage of your annual salary to your pension account each year and works out your retirement income based on the value of your pension account when you retire.
For more information about CARE pensions, click here for local government, here for police, and here for firefighters.
Your annual pension is calculated by multiplying how long you’ve been a member of the scheme by your final salary, then dividing by a fraction – typically 1/60th or 1/80th. This is known as the accrual rate. Accrual rates vary depending on which scheme you were in and when you joined. If you were a part-time worker, your length of service will be reduced according to the hours you worked.
Along with any CARE pension you build up, these figures will help to make up your annual retirement income.
The schemes also offer different features from one another. For example, the normal retirement age can vary, as can the contribution rates and accrual rates. Plus Police and Firefighters’ pension schemes allow members to make additional pension contributions (APCs), whereas Local Government pensions allow members to make APCs and additional voluntary contributions (AVCs).
Your pension is a workplace pension defined benefit scheme. It has been created for people working in the public sector, like in local government, with contributions coming out of your monthly salary. Your employer will have enrolled you into the scheme.
A personal pension is a type of defined contribution scheme. You invest in this pension by paying your own contributions into it to build up a pot of money, which is used to provide yourself with a possible lump sum and/or retirement income.
This is pension member who is actively contributing to their pension each month.
This is a pension member who has left their pension scheme (such as moved jobs) so is no longer contributing to their pension.
Pension terms and phrases
This is the hypothetical pay you would have received if your actual pay is reduced due to absence from work (for example, due to ill health, maternity/paternity leave or adoption leave).
This is the process of being automatically enrolled by your employer into a pension scheme. The Government rules state that employers are obliged to automatically enrol all eligible emplolyees (who aren’t already a member) into a workplace pension every three years.
A death grant is a financial lump sum that is payable in the event of your death when you have a local government, police or firefighters’ pension. It acts as a kind of life insurance for your loved ones when you die.
To learn more, see the FAQ, What is a death grant on our Bereavement Process page
This is the age you can receive your pension in full under the scheme rules. In many cases this will be the same as your state pension age, although it may be earlier depending on which scheme you’re in and when you joined.
There is a chance it will change if the state pension age increases.
This is the earliest age you can start receiving your state pension. This is currently 66 but is set to gradually increase to 67 and then 68 (for those born after 5 April 1960).
Trivial commutation is when you take all of your pension as a one-off lump sum (rather than part of it, like with a ‘pension commencement’ lump sum.
To find out more or to check if your eligible, see the ‘One-off lump sum (trivial commutation) FAQs on the Your pension benefits page here.
This is the length of time you must be contributing to a pension, before you’re entitled to those benefits. It’s a minimum of two years for LGPS members and Police scheme members and three months for Firefighter scheme members.
To learn more, visit the Vesting Period page on the LGPS website.
How your pension works
This the amount of money that you contribute to your pension each month, which is taken from your salary – plus any financial contributions made by your employer.
Yes, it is. This is because your pension is part of a defined benefit scheme, which means you’ll get a guaranteed pension when you retire. Rest assured, your pension is not affected by the ups and downs of the stock market.
Yes, but you will need to set it up. To get started, visit the access my online account page of the LPPA website.
Only if your earnings change, as the amount of contributions you pay into your pension depends on what you earn.
In the Local Government Pension Scheme (LGPS), you pay a contribution rate of between 5.5 per cent and 12.5 per cent, depending on your wage.
In the Firefighters’ scheme (2015) this is between 11 per cent and 14.5 per cent.
In the Police scheme (2015) this is between 12.44 and 13.78 per cent. Please be aware, these contribution rates may be reduced if you are ineligible for ill health benefits.
To find out more, click here for LGPS, here for Firefighters’ and here for Police pension contribution rates.
Your pension will usually continue to be paid until you die. It may also continue to pay a survivor’s pension to your partner or a dependant child after you die.
Your pension is calculated based on your salary and how long you have been paying into the scheme. It is made up of any CARE benefits and/or Final Salary benefits you have built up, depending on when you joined the scheme.
When you pay into your pension scheme each month, your employer does too – helping to meet the costs of your benefits in the scheme. The amount they pay varies from employer to employer and depends on what scheme you’re in. But, generally, you (the member) contributes around one third of the scheme’s costs and your employer contributes the rest.
To find out more, click here for the Local Government Pension Scheme, here for the Police Pension Scheme, and here the Firefighters’ Pension Scheme. Or to find out exactly how much your employer contributes, contact your HR or Payroll department.
Your pension is based on what you earn. Reducing your hours won’t affect the pension you have built up already, just the pension you will build up in the future (which won’t be as much as if you had been working full time).
Opting in
Your employer will set up your pension account for you. If you are eligible, you can also opt-in to the scheme at any time if you have previously opted out.
Please note, you will need to complete a starter form to join the Police or Firefighters’ Pension Scheme, which you can download from our Forms and documents page.
You’ll receive our welcome letter, introducing you to the scheme and telling you what you need to know.
Yes. If you opted out previously, you can opt-in at any time, provided you remain eligible for membership. Please note, you may need to pay to take a medical examination to rejoin the Police Pension Scheme.
Opting out
Yes, you can. There’s no rule that you must remain a member of your scheme. But it’s wise to think carefully before making a decision. If you’re a member of an LGPS scheme, you also have the option of switching to the 50/50 scheme as an alternative to opting out.
You just need to fill out a Local Government, Police or Firefighters’ Pension opt-out form, which you can download from our Forms and documents page, and pass it on to your HR or payroll department.
You can be refunded your pension contributions, as long as you opt out after less than three months (depending on your scheme).
Yes, as long as you are under age 75, but you may need to write to your employer to let them know.
No, you can’t. But you can opt back in once you’ve opted out. If you are a member of an LGPS scheme, you also have the option of switching to the 50/50 scheme as an alternative to opting out.
As a deferred member you can’t pay contributions into your scheme, but the pension you’ve already built up is adjusted in line with inflation each year. You can then claim the benefits of the scheme when you retire or transfer them to another scheme.
You get tax relief on the pension contributions you pay in. This means you won’t be refunded the same amount of contributions as we’ll need to deduct the tax (you would have paid without the tax relief).
Marriage and divorce
Nothing. Your pension will stay the same and you will continue to contribute to it as normal.
You just need to update any relevant details, such as your name and address (if it has changed). Depending on your scheme, you might also want to update your nominated beneficiary details.
Getting divorced does not affect your benefits unless the court places a Pension Sharing Order. If this happens, your benefits will be reduced and your ex-spouse or ex-civil partner will be awarded some of your benefits. But they will no longer be entitled to a survivor’s pension if you die before them.
It’s wise to also check that your nominated beneficiaries are up to date. Scroll down for FAQS about nominating beneficiaries.
Find out more about what happens when you get a divorce here.
Your annual benefit statement (ABS)
Your ABS is an estimate of your pension. It shows how much your pension account is currently worth and provides a forecast of what you’re estimated to get at your normal pension age – along with any survivor’s pension and death grant entitlement.
Watch our video FAQ or find out more about your ABS here including a section-by-section explanation guide.
You can access it on your online PensionPoint account. Simply log in or register for an account.
Find out everything you need to know about your ABS on our website, including a section-by-section explanation guide.
Nominated beneficiaries
This is the person you choose to receive your lump sum death grant – a sum of money that can be given to your loved ones in the event of your death.
If you are part of a Local Government or Firefighters’ scheme you can nominate loved ones, family and friends. If you have a Local Government pension you can even nominate an organisation like a charity.
This works slightly differently if you’re a member of a Police Pension Scheme. If you’re married or in a civil partnership when you die (as an active member), your death grant will automatically go to your spouse or civil partner. If you’re not married or in a civil partnership, you can nominate a beneficiary.
The easiest way to do this is via your online account. See Updating your details on Your online account FAQs to learn more.
Yes, you can. You can decide how you’d liked the lump sum to be split between them too. You can also update your nomination(s) at any point in the future.
