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Benefits

As a member of the Local Government Pension Scheme, you can pay extra to increase your pension benefits. You may wish to consider paying extra contributions, which are a tax efficient way of topping up your income when you retire. You can combine any of these options.

You can improve your retirement benefits by paying:

  • Additional Regular Contributions (ARCs) to buy extra LGPS pension
  • Additional Voluntary Contributions (AVCs) to the in-house AVC scheme
  • Free Standing Additional Voluntary Contributions (FSAVCs) to a scheme of your choice
  • Contributions into a stakeholder or personal pension plan

Are there any limits on how much I can pay to increase my pension benefits?

At the present time there is no overall limit on the amount of contributions you can pay (although there is a limit on the extra Scheme pension you can buy). However, tax relief will only be given on contributions up to 100% of your taxable earnings.

Additionally, under HM Revenue and Customs tax rules there are controls on the pension savings you can have before you become subject to a tax charge - these will mainly affect some higher paid people.

Can I increase my dependant’s benefits?

You can pay extra contributions to increase the level of your husband’s, wife’s, civil partner’s or nominated co-habiting partner’s pension and any pension payable to your eligible children on your death. You can also increase your death in service life cover as part of an AVC arrangement.

For full details of your options please contact your Pension Fund administrator.

I'm thinking of going back to work

If you get a job after your retirement outside of local government with an employer that does not participate in the LGPS, your LGPS pension will not be affected. If you get a job in local government or with an employer that participates in the LGPS, your pension may be reduced or suspended. This is at the discretion of your administering authority and their policy on it must be included in a policy statement.

Your pension fund administrator must:

  • pay interest on lump sum benefits that are paid more than one month after they could have been paid.
  • pay interest on pensions that are paid more than a year after they should have been paid.

Your employer can:

  • reduce your pension benefits if you cease to be employed as a result of a criminal, negligent or fraudulent act, or omission as a result of which you have incurred some monetary obligation to your employer.
  • forfeit your pension rights if the Scottish Ministers agree and you have been convicted of a serious offence connected with your employment.

You are not allowed to assign your benefits, your LGPS benefits are strictly personal and cannot be assigned to anyone else or used as security for a loan.

I'm getting divorced

What is the process to be followed?

You will need specific information about your LGPS benefits as part of the proceedings for a divorce, judicial separation or nullity of marriage, or for dissolution, separation or nullity of a civil partnership. You or your solicitor should contact your Pension Fund administrator for this information, including an estimate of the cash equivalent value (CEV) of your pension rights. The Court will take this value into account in your settlement. In Scotland, only the pension rights built up during your marriage/civil partnership are taken into account.

You usually get one free CEV estimate each year. Any other costs for supplying information or complying with a Court Order will be recovered from you and/or your ex-spouse or ex-civil partner in accordance with a schedule of charges available from your Pension Fund administrator. All correspondence received by your Pension fund administrator in connection with divorce or dissolution proceedings will be acknowledged in writing. The Court may offset the value of your pension rights against your other assets in the divorce/dissolution settlement or it may issue a Pension Sharing Order (qualifying agreements in Scotland) or an Earmarking Order against your pension.

Your ex-wife, ex-husband or ex-civil partner will cease to be entitled to a widow’s, widower’s or civil partner’s pension should you die before them.

Any children’s pension paid to an eligible child in the event of your death will not be affected by your divorce or dissolution.

If you have said that you would like your ex-wife, ex-husband or ex-civil partner to receive any lump sum death grant payable on your death by completing and returning an expression of wish form, this will remain in place unless you change it. If your wishes change contact your Pension Fund administrator for a new form. The Court may issue an Earmarking Order stating that all or part of any lump sum death grant is payable to your ex-spouse or ex-civil partner.

Offsetting pension rights

You can offset the value of your pension rights against the value of other financial assets in your divorce/dissolution settlement. For example, you could keep your pension, and your ex-spouse or ex-civil partner could get a larger share of the value of the house.

Pension Sharing Order

If the Court issues a Pension Sharing Order, or your benefits are subject to a qualifying agreement in Scotland, part of your benefits are transferred into your ex-spouse's or ex-civil partner’s possession. They will keep that share even if your or their circumstances change. Your ex-spouse or ex-civil partner will hold those benefits in his/her own right. They can be left in the Scheme and are normally paid from age 65 or can be transferred to another qualifying pension scheme.

Your pension and any lump sum will be reduced by the amount allocated to your ex-spouse or ex-civil partner at the point of divorce/dissolution. The reduction to your benefits is known as a Pension Debit. The amount of the Pension Debit will be increased in line with the rise in the Consumer Prices Index between the date it was first calculated and the date your benefits are paid. When your benefits are paid, the revalued amount of the Pension Debit will be deducted from your retirement benefits.

You may be able top up your benefits by buying extra Scheme pension, paying Additional Voluntary Contributions (AVCs) or Free Standing AVCs (FSAVCs), or by paying into a concurrent personal pension plan or stakeholder pension scheme in order to make up for the benefits 'lost' following a Pension Share. You can still transfer your remaining benefits to another pension arrangement on leaving the LGPS. If you transfer within the LGPS, your new fund will reduce your benefits by the Pension Debit at retirement.

Earmarking Order

If the Court makes an Earmarking Order, your LGPS benefits still belong to you, but some are earmarked for your ex-spouse or ex-civil partner. The earmarked benefits will be paid to your ex-spouse or ex-civil partner when your benefits are paid, reducing the amount paid to you.

The Order can require that your ex-spouse or ex-civil partner receive one or a combination of the following:

  • All or part of your LGPS pension (this doesn’t apply to divorces / dissolutions in Scotland)
  • All or part of any lump sum payable to you, and
  • All or part of any lump sum payable on your death.

When earmarked benefits become payable, your Pension Fund administrator will contact your ex-spouse or ex-civil partner to check that the Earmarking Order is still valid and arrange payment of the earmarked benefits. You can transfer your benefits to another pension arrangement on leaving the LGPS, as long as your new pension provider can accept the earmarking order.

Earmarking has limitations and is not widely used. As the pension rights remain with you, your ex-spouse or ex-civil partner must wait for you to retire or die to receive the earmarked benefits. If your former spouse or civil partner remarries or enters into a new civil partnership an Earmarking Order against pension payments, but not lump sums (unless the Order directs otherwise), would cease and the full pension would be restored to you. Pension payments to your former spouse or civil partner would cease on your death, although any earmarked lump sum death grant would then become payable to your ex-spouse or ex-civil partner.

What if I remarry or enter into a new civil partnership?

If your LGPS benefits are subject to a Pension Sharing Order and you remarry, enter into a new civil partnership or nominate a co-habiting partner to receive a survivor’s pension, any spouse's pension, civil partner’s pension or nominated co-habiting partner’s pension payable following your death will also be reduced.

If you remarry or enter into a new civil partnership and then divorce or dissolve your civil partnership again, your remaining pension rights can be subject to further division, although a Pension Sharing Order cannot be issued if an Earmarking Order has already been issued against your LGPS pension rights. Similarly, an Earmarking Order cannot be issued if your pension benefits are already subject to a Pension Sharing Order in respect of the marriage/civil partnership.

What will happen in the event of my death?

What benefits will be paid if I die in service?

If you die in service as a member of the LGPS, the benefits shown below are payable.

A lump sum death grant: A one-off payment calculated at three times your final year's pay,no matter how long you have been a member of the LGPS, provided you are under age 75 at the date of death. For part-time employees, it is three times your actual part-time pay.

A survivor's pension: An ongoing pension is provided for your husband, wife, registered civil partner or, subject to certain qualifying conditions, your nominated co-habiting partner. This pension is payable immediately after your death for the rest of their life and will increase every year in line with the cost of living (Consumer Prices Index).

For your husband/wife: The pension payable is equal to 1/160th of your final pay times the membership you would have built up to age 65

For your civil partner or nominated co-habiting partner: The pension payable is calculated in the same way, although only your membership from 6th April 1988 is used in the calculation. (To nominate a co-habiting partner your relationship has to meet certain conditions laid down by the LGPS - please contact your Pension Fund administrator for details)

Children's pensions: Payable to eligible children and increase every year in line with the cost of living (Consumer Prices Index). The amount of pension depends on the number of eligible children you have:

If a survivor's pension is being paid to your husband, wife, civil partner or nominated co-habiting partner, one child would receive 1/320th of your final pay times the membership you would have built up to age 65, while two or more children would receive 1/160th shared equally between them.

If there is no survivor's pension being paid to your husband, wife, civil partner or nominated co-habiting partner , one child would receive 1/240th of your final pay times the membership you would have built up to age 65, while two or more children would receive 1/120th shared equally between them.

If you pay additional contributions:

Extra LGPS pension: if you opted to pay for dependant's benefits when you took out your original contract, then extra benefits will be payable to your husband, wife, civil partner or nominated co-habiting partner and to eligible children as if you had completed all payments. If you did not opt to pay for dependant's benefits when you took out your original contract, then no extra benefits will be payable.

LGPS added years: if you bought LGPS added years before 1st April 2009, you will be credited on your death with the whole extra period of membership that you set out to buy, even if you have not completed full payment for it. This will increase the value of the benefits payable to your husband, wife, civil partner or nominated co-habiting partner and to eligible children. This option was discontinued on 1 April 2009 but in its place there is now the option of buying additional pension.

If you pay Additional Voluntary Contributions (AVCs):

The value of your in-house (arranged through the LGPS) AVC fund is payable, as is any extra life cover or spouse’s/civil partner’s pension paid for through AVCs.

What benefits will be paid if I die after retiring on pension?

If you die after retiring on pension, your benefits will no longer be payable. Your husband, wife, civil partner, co-habiting partner, next-of-kin or person dealing with your Estate must immediately inform your Pension Fund administrator of your date of death as otherwise an overpayment could occur.

The following benefits may then be payable on your death: 

A lump sum death grant:

If you die within the first 10 years on pension, and you are under age 75. The amount payable would be 10 times your annual pension reduced by any pension already paid to you (ignoring any reduction in your pension as a result of re-employment by an employer offering membership of the LGPS).

A survivor's pension:

A pension will be paid to your husband, wife, registered civil partner or, subject to certain qualifying conditions, your nominated co-habiting partner. This pension is payable immediately after your death for the rest of their life and will increase every year in line with the cost of living (RPI).

For your husband or wife: the pension payable is equal to 1/160th of your final pay times the membership your pension is based on, unless you marry after retirement in which case it could be less. If you marry after retiring:

Your husband's pension is based on your membership after 5th April 1988, (excluding, unless you were married to your husband at some time whilst you paid into the LGPS, additional membership purchased by you or granted to you by your employer or the scheme),

Your wife's pension is based on your contracted-out membership after 5th April 1978.

For your civil partner or nominated co-habiting partner: the pension payable is equal to 1/160th of your final pay times your membership in the scheme after 5th April 1988.

Children's pensions:

These are payable to eligible children and increase every year in line with the cost of living (Consumer Prices Index). The amount of pension depends on the number of eligible children you have:

If a survivor's pension is being paid to your husband, wife, civil partner or nominated co-habiting partner, one child would receive 1/320th of your final pay times the membership your pension is based on, while two or more children would receive 1/160th shared equally between them.

If there is no survivor's pension being paid to your husband's, wife's, civil partner's or nominated co-habiting partner's, one child would receive 1/240th of your final pay times the membership your pension is based on, while two or more children would receive 1/120th shared equally between them.

Are my family entitled to benefits?

If you die after retiring on pension, your benefits will no longer be payable, however your family may be entitled to further benefits.

If you die in service as a member of the LGPS, there are various benefits that may be payable to your surviving dependents.

You can pay extra contributions to increase the level of your husband’s, wife’s, civil partner’s or nominated co-habiting partner’s pension and any pension payable to your eligible children on your death. You can also increase your death in service life cover as part of an AVC arrangement.

For full details of your personal options please contact your Pension Fund administrator.

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