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Local Government Annual Pension Statements

These notes should be read in conjunction with the information provided on your LGPS annual statement.

Notes relating to your Local Government Pension Scheme (LGPS) Annual Pension Statement

Each year the Pension Section is committed to providing an annual statement for our scheme members. Unless you have advised us that you wish to receive a paper copy, your statement will be held on the online pensions service, our online facility for members. If you haven’t yet registered for this facility, all you need is your National Insurance number and postcode. The process should take around twenty minutes.

If you have any queries regarding these notes feel free to contact the pensions section.

Active Members

Qualification for scheme benefits

If you joined the LGPS on or after 1 April 2014, with no earlier period of LGPS membership in England or Wales and having not transferred any previous pension rights into the LGPS, you MUST be a member of the scheme for TWO YEARS before you have any entitlement to LGPS pension benefits. This information therefore is calculated on the assumption that you will continue to contribute to the LGPS until your retirement age.

Retirement Age

The retirement age in the LGPS is now linked to your state pension age, subject to a minimum of 65, and is known as your Normal Pension Age, or NPA. The date quoted on this statement reflects your current state pension age, but should that date change in the future, then your NPA will also change.

Pension Taxation

There are two areas of taxation for pension growth, the annual allowance and lifetime allowance. The annual allowance is the amount by which your pension benefits may increase, in any one year, without having to pay a tax charge.

The lifetime allowance is a limit on the total value of pension savings that you can have, without triggering a tax charge. From 6 April 2016 to 5 April 2018 the lifetime allowance was £1,000,000. Now it increases annually in line with inflation. From 6 April 2018 it increased to £1,030,000. From 6 April 2019 it increased to £1,055,000. Paying additional contributions, including Additional Voluntary Contributions (AVCs), increase the likelihood of triggering a tax charge.

Pension taxation is a complex area and legislation can change on a regular basis. If you feel that you will be affected by either the annual allowance or lifetime allowance, visit Pension taxation for more information or seek your own financial advice. The Pension Section cannot provide financial advice.

Death Grant

If, in addition to this pension benefit, you have an entitlement to a deferred pension, suspended tier three ill health pension or a pension in payment from an earlier period of LGPS membership in England or Wales, the death grant payable, if you were to die as an active member, is the greater of that in respect of your active period of membership (as shown on your statement) OR the death grant due from any of your earlier benefits. If your active death grant is greater, no death grant will be payable in respect of the earlier benefits. However, if the death grant from one of the earlier benefits is greater, NO death grant will be paid from this pension benefit.

Please note that the following elements are not taken into account on your pension statement:

Early Retirement Reductions

If you are over age 55 as at 31 March 2019, your benefits do NOT include any early retirement reduction that would apply if you were to retire before your retirement age.

Additional Voluntary Contributions

AVC contributions are not taken into account on your statement, although any pension purchased under the scheme are included (i.e. ARCs or APCs).

Pension Sharing Orders

If a pension sharing order has been applied to your pension following a divorce, resulting in a reduction to your pension benefits, this has NOT been taken into account in the figures stated.

‘Scheme Pays’ Reductions

If you have, at any time breached the annual allowance and elected for the pension scheme to pay the tax charge, the figures quoted do not take into account the reduction to benefits to meet the tax charge. The amount of the reduction will be calculated when the benefits are drawn.

How do I know if my pay figures are correct?

Career Average Revalued Earnings (CARE) Pay

Your CARE pensionable pay will reflect the actual pay that you paid pension contributions on during the period 1 April 2018 to 31 March 2019. If you have elected to move from the main section to the 50:50 section, your employer has provided two separate figures, one relating to each period.

This would include casual overtime, but not expenses or mileage.

If you have been on any reduced or nil pay due to sickness, or reduced pay because of maternity or child related leave, for pension calculations only, your employer will boost your actual pay up to a level in line with what you would have been earning had you not been away from work. Please check to see if this has happened in your case.

This figure needs to be accurate as part of your eventual retirement income will come from this figure.

If you believe that this figure is incorrect then you should contact your employer’s payroll section (not the pensions section) for clarification. You should do this before 31 March 2020.
 

Final Salary Pay

Your final salary pensionable pay will reflect your salary grade, i.e. the level of pay you would have earned had you been full time from 1 April 2018 to 31 March 2019. Full time for this exercise means the pay you would have received had you worked a 52 weeks year, working 37 hours a week.

Casual overtime would not be included in this figure.

The figure should be unaffected by any periods of reduced or nil pay sickness, or reduced pay due to maternity or child related leave. The employer should have provided us with the level of pay you would have received had you not been absent from work.

If you are a Clerk to Governors or a Returning Officer, you will see an actual pay figure showing the value of the fees paid to you, as your pension is worked out slightly differently from other LGPS members who receive a salary or are on an hourly rate.

This figure needs to be reasonable as this is just a forecast. More precise figures will be calculated when you actually come to retire/leave employment.

If you believe that this figure is significantly different to what you think it should be, then, again, please contact your employer’s payroll section (not the pensions section) for clarification.

 

Disclaimer: Every effort is made to ensure that figures provided are as accurate as possible but cannot be guaranteed. At the point that you claim your pension benefits your employer will provide up to date pay information which would determine the amount of benefits you will receive. The Council disclaims any liability arising from any decision taken on the basis of the figures quoted.

Deferred Members

Flexible Options

On the statement you will see what your pension is currently worth. These benefits will continue to increase in line with the Consumer Price Index (CPI) when the index is positive and will become payable in the future. You can choose to take a bigger lump sum than that shown on this statement, if you wish.

This is done by reducing your pension, and the rate of conversion is 12:1. What this means is that for every £1 of pension you give up, you can receive an extra £12 of lump sum. There are limits to the rules, and you will be notified of the maximum lump sum you can go up to.

We will write to you at retirement with all of the figures and you will then be asked for a decision on what you want to do.

However, if you did choose to take the bigger lump sum, this would not affect any future pension benefits for your dependants, should they become payable.

Another way of taking a bigger lump sum, will apply to any members who took out an in house AVC policy. It is possible to take extra cash from the AVC fund as an alternative to using it all to buy an extra pension (or an annuity as it is sometimes called).

Transferring your Benefits

On 6 April 2015 the Government introduced greater flexibility for pension savings in defined contribution schemes. These apply to individuals aged 55 or over and are known as Freedom and Choice. The LGPS is not this type of scheme; instead it is a defined benefit scheme. However, there are some indirect changes that impact on LGPS members who are considering transferring their benefits from the LGPS to a defined contribution scheme.

Subject to certain restrictions, you can usually transfer your benefits to another approved pension provider, including those offering flexibilities from Freedom and Choice.

However, if you are considering transferring your LGPS benefits you need to guard against Pension Liberation Fraud, also known as Pension Scams. Significant tax penalties may apply to those who transfer and access benefits.

The Pensions Regulator website provides useful information about protecting yourself from pension scams.

Additional Voluntary Contributions

If you have Additional Voluntary Contributions (AVCs), they are not shown as your AVC provider sends a separate statement annually.

Payment of your pension benefits

If you left the LGPS after31 March 2014, the payment date of your benefits is linked to your State Pension Age, although this can be no earlier than your 65th birthday. The date shown on this document may therefore change in the future. However, you can elect to receive your retirement benefits from age 55, but an early retirement reduction may apply.

If you left the LGPS before 1 April 2014, the payment date of your benefits will be as stated on this document. However, from age 55, you may be able to elect to receive your pension, but an early retirement reduction may apply.

You can now choose to delay drawing your deferred benefits up until age 75 if you wish.

Please note that your benefits are payable subject to confirmation that your date of birth is held correctly.

You could apply to receive your benefits earlier, subject to meeting certain conditions. The pension could be paid out on ill health grounds at any age. If you think that this may apply to you, you should submit a written application supported by medical evidence to your former employer’s HR section, NOT the Pensions Section.

Pension Taxation

There are two areas of taxation for pension growth; the annual allowance and the lifetime allowance. The annual allowance is the amount by which your pension benefits may increase, in any one year, without having to pay a tax charge. Since 6 April 2014 this has been £40,000 per year for most people. The good news is the cost of living increase in your deferred benefit does not count towards the annual allowance.

The lifetime allowance is a limit on the total value of pension savings that you can have, without triggering a tax charge. From 6 April 2016 to 5 April 2018 the lifetime allowance was £1,000,000. Now it increases annually in line with inflation.  From 6 April 2018 it increased to £1,030,000.  From 6 April 2019 it increased to £1,055,000.

Re-joining the LGPS

If in future you re-join the LGPS in another fund in England or Wales, please let us know. You may be entitled to transfer these benefits to your new fund and we will let you know what action you will need to know what action you will need to take regarding this.

 

Disclaimer: Every effort is made to ensure that figures provided are as accurate as possible but cannot be guaranteed. At the point that you claim your pension benefits your employer will provide up to date pay information which would determine the amount of benefits you will receive. The Council disclaims any liability arising from any decision taken on the basis of the figures quoted.

August 2019

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