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For members of the Local Government Pension Scheme in England and Wales

Glossary

A

Additional Voluntary Contributions

Additional Voluntary Contributions, or AVCs, are extra payments to increase your future benefits. You can also pay AVCs to provide life cover. All LGPS pension funds have an AVC arrangement. You can invest money through their AVC provider, which is often an insurance company or building society. AVCs are taken directly from your pay and attract tax relief.

Admission body

An admission body is an employer that chooses to participate in the LGPS under an admission agreement. Admission bodies tend to be employers such as charities and contractors.

Assumed Pensionable Pay

Assumed Pensionable Pay is a notional pay figure that means your pension is not affected if your pay is reduced when you are absent. Your pension will be based on Assumed Pensionable Pay during a period of reserve forces leave, relevant child related leave and when your pay is reduced because of sickness or injury. See the section If you are away from work for more information on how this works.

If you retire due to your ill health, Assumed Pensionable Pay is used to work out any enhancement to your pension.

If you die in service, the lump sum death grant is based on Assumed Pensionable Pay. Any enhancement to the survivor benefits paid after your death will also be based on Assumed Pensionable Pay.

Automatic enrolment date

Your automatic enrolment date is the earlier of:

  • the day you reach age 22 – if you are earning more than £10,000 a year
  • the beginning of the pay period in which you first earn more than £10,000 a year – as long as you are over age 22 and under State Pension age at the time.

Automatic enrolment will only affect you if you are employed by an LGPS Scheme employer, but you are not paying into the LGPS. See the section on Automatic enrolment for more information.

C

Civil partners

A civil partnership is a relationship between two people that is formed when they register as civil partners of each other.

Club transfer rules

Club transfer rules allow certain pension schemes to calculate pension transfers on special terms. Public service pension schemes generally operate club transfers. See the section on Transferring in for more information.

Consumer Prices Index (CPI)

The Consumer Prices Index, or CPI, is the official measure of inflation in the UK. CPI is currently the measure that is used to adjust your pension account at the end of every Scheme year when you are an active member. CPI is also used to increase the value of any LGPS deferred pensions and pensions in payment every April. The adjustment ensure that the value of your pension account, deferred pension or pension in payment keeps up with the cost of living.

Contracted out

The LGPS was contracted out of the State Earnings Related Pension Scheme, known as SERPS, and the State Second Pension (S2P) from 6 April 1978 to 5 April 2016. This meant that most LGPS members paid reduced National Insurance contributions in this period. If you reached your State Pension age before 6 April 2016, the increases to your pension may be worked out differently. See the FAQs section covering ‘After leaving’ for more information about how your LGPS increases.

D

Designating body

Designating bodies are employers that can designate employees for access to the LGPS. The main types of designating bodies are listed below, but there are others:

  • town and parish councils
  • voluntary schools
  • foundation schools
  • foundation special schools
  • federated schools
  • technical institutes
  • Transport for London
  • the Children and Family Court Advisory and Support Services.

Discretion

Discretion is the power given by the LGPS to choose how to apply the Scheme rules in certain situations. Your employer and pension fund have the power to exercise different discretions. See the section on What to expect from your pension fund and employer for more information.

E

Eligible child

An eligible child is:

  • a natural child born before, on or within 12 months of a member’s death
  • an adopted child born before or on the date of the member’s death
  • a step-child or a child accepted by the deceased member as a member of the family who was dependent on the member at the date of death.

A child sponsored by the member through a registered charity is not an eligible child.

An eligible child must also be:

  • under age 18, or
  • aged under 23 and in full-time education or vocation training. Your pension fund can continue to treat a child as an eligible child even of there has been a break in full-time or vocational training, or
  • under age 23 and unable to engage in gainful employment because of physical or mental impairment, or
  • over age 23, unable to engage in gainful employment because of permanent physical or mental impairment and the child was dependent on the member at the date of death because of that impairment. An independent registered medical practitioner must give their opinion on whether the impairment is likely to be permanent.

Gainful employment means paid employment for at least 30 hours per week that lasts for at least a year.

Eligible cohabiting partner

An eligible cohabiting partner is a partner you are living with who, at the date of your death, has met all of these conditions for a continuous period of at least two years:

  • you and your cohabiting partner are, and have been, free to marry each other or enter into a civil partnership with each other, and
  • you and your cohabiting partner have been living together as if you were a married couple or civil partners, and
  • neither you nor your cohabiting partner has been living with someone else as if you / they were a married couple or civil partners, and
  • either your cohabiting partner is and has been dependent on you, or you are and have been financially interdependent on each other.

Your partner is financially dependent on you if you have the highest income. Financially interdependent means that you rely on your joint finances to support your standard of living. It doesn’t mean that you need to be contributing equally. For example, if your partner’s income is more than yours, he or she may pay the mortgage and most of the bills and you may pay for the weekly shopping.

When you die, a survivor’s pension would be paid to your cohabiting partner if:

  • all of the above conditions were met on your date of death, and
  • your cohabiting partner satisfies your pension fund that these conditions had been met for a continuous period of two years immediately before your death.

You are not required to complete a form to nominate your cohabiting partner. However, you can provide your cohabiting partner’s details to your pension fund. Contact your pension fund to see if they have a form you can use to do this.

A pension will only be paid to your eligible cohabiting partner if you paid into the LGPS after 31 March 2008.

Eligible Jobholder

An eligible jobholder is a worker aged between 22 and State Pension age who earns more than £10,000 per year.

F

Final pay

Final pay is the figure used to work out final salary benefits in the LGPS. Final pay is usually the pay due for your final year of Scheme membership. Pay for one of the previous two years can be used if it is higher. Final pay includes:

  • your normal pay
  • contractual shift allowance
  • bonus
  • contractual overtime
  • maternity, paternity, adoption or shared parental pay
  • any other taxable benefit specified in your contract as being pensionable.

Final pay does not include non-contractual overtime.

If you were part time during your final year, your final pay is based on the pay you would have been due if you had worked full time.

If your pay in the final year is reduced because of sickness or child-related leave, final pay is the pay that would have been due if you had not been sick or on leave.

Flexible benefits

Flexible benefits are ways that members of defined contribution pension schemes can take money from their pension pots after age 55. The LGPS is not a defined contribution pension scheme. The introduction of flexible benefits in 2015 did not bring in any new ways that you can take your LGPS pension.

There are four main ways that members of defined contribution pension schemes that offer flexible benefits can take money from their pension pots. Those four ways are:

  • to purchase an annuity (yearly pension) or scheme pension
  • take a number of lump sums at different times
  • take the entire pot as cash in one go
  • flexi-access drawdown.
G

Guaranteed Minimum Pension

If you were a member of the LGPS between 6 April 1978 and 5 April 1997, you paid reduced National Insurance contributions. You did not pay into the State Earnings Related Pension Scheme, or SERPS, when you were an LGPS member. The LGPS guarantees to pay you a pension at least as good as you would have received from SERPS. This is called the Guaranteed Minimum Pension or GMP.

L

Local government

The term local government on this website also covers:

  • police and fire civilian staff
  • a coroner
  • civil servants engaged in probation provision
  • a Mayoral development corporation
  • a conservation board
  • a valuation tribunal
  • a passenger transport authority
  • the Environment Agency
  • non-teaching employees of an academy employer, an Education Action Forum, a sixth form college corporation and Further or Higher Education Corporation.
N

Normal Pension Age

Normal Pension Age is the age you can take the pension you have built up from April 2014  in full. it is linked to your State Pension age, but with a minimum of age 65. If you choose to take your pension before your Normal Pension Age, it will normally be reduced because it is being paid early. If you take it after your Normal Pension Age, your pension will be increased because it’s being paid late. See the section on Taking your pension for more information.

O

Occupational pension scheme

Occupational pension schemes are also called company pension schemes. An occupational pension scheme is a scheme set up by an employer to provide pension or death benefits for its employees.

An occupational pension scheme can provide pension benefits on a money purchase, defined benefits, cash balance or hybrid arrangement basis. Occupational pension schemes are most commonly money purchase or defined benefits schemes. The LGPS is a defined benefits scheme.

When you leave a job you will generally have to stop building up pension savings in that employer’s scheme.

P

Pension account

Each Scheme year the amount of pension you have built up is worked out and added to your pension account. You can find out more about pension accounts in the How your pension is worked out section.

You will have a separate pension account for each employment. That pension account will hold the total pension built up in that employment.

In addition to an active members’ pension account there are also deferred members’, flexible pension members’, deferred pension members’, pension credit members’ and survivor members’ pension accounts.

Pension credit

A pension credit is a share of an ex-spouse’s or ex-civil partner’s pension benefits. A pension credit is awarded by a Court under a Pension Sharing Order or by a qualifying agreement in Scotland following a divorce or dissolution of a civil partnership. You can read more about pension credits in the FAQs.

Pensionable pay

Pensionable pay is the pay that pension contributions are deducted from. Pensionable pay includes:

  • your normal salary or wages
  • bonuses
  • overtime – both contractual and non-contractual
  • pay for additional hours if you work part time
  • maternity, paternity, adoption and shared parental pay
  • shift allowance
  • any other taxable benefits specified as pensionable in your contract.

You do not pay pension contributions on:

  • any travelling or subsistence allowances
  • pay in lieu of notice
  • pay in consideration of loss of holidays
  • pay as an inducement not to leave before the payment is made
  • any award of compensation made for the purpose of achieving equal pay, other than a payment representing arrears of pay
  • pay relating to loss of future pensionable payments or benefits
  • pay paid by your employer when you are on reserve forces leave
  • the monetary value of a car or pay received in lieu of a car
  • any sum which has not had tax liability determined on it.

Public service pension scheme

A public service pension scheme is a pension scheme covering:

  • civil servants
  • the judiciary
  • the armed forces
  • local government workers in England, Wales or Scotland
  • teachers in England, Wales or Scotland
  • health service workers in England, Wales or Scotland
  • fire and rescue workers in England, Wales or Scotland
  • members of the police forces in England, Wales or Scotland, or
  • members of a new public body pension scheme.
R

Relevant child related leave means periods of:

  • ordinary maternity leave – normally the first 26 weeks
  • ordinary adoption leave – normally the first 26 weeks
  • paid shared parental leave
  • paternity leave
  • paid parental bereavement leave
  • paid additional maternity leave – normally weeks 27 to 39
  • paid additional adoption leave – normally weeks 27 to 39.

Reserve forces leave

Reserve forces leave occurs when a reservist is mobilised and called on to take part in military operations. A reservist can be mobilised for a period of up to 12 months. If you are on reserved forces leave, you can choose whether to stay in the LGPS for the period. If you choose to stay in the LGPS, you will build up pension based on your assumed pensionable pay during the reserve forces leave.

S

Scheme year

The Scheme year runs from 1 April to 31 March.

The State Earnings Related Pension Scheme or SERPS is the earnings-related part of the State Pension that employed people could build up before 6 April 2002. LGPS members were automatically contracted out of SERPS and most paid a lower rate of National Insurance as a result. SERPS was replaced by the State Second Pension (S2p) between 6 April 2002 and 5 April 2016. Contracting out ended on 5 April 2016.

State Pension age

Your State Pension age is the earliest age that you can receive the basic State Pension. State Pension age was equalised at 65 for men and women in 2018 and increased to 66 in 2020.

Under current legislation State Pension age is due to rise to 67 between 2026 and 2028 and to 68 between 2044 and 2046. However, the Government has announced plans to link rises in State Pension age to increases in life expectancy.

You can use the Government’s State Pension age calculator to Check your State Pension age.

State Second Pension

The State Second Pension or S2P was the additional state pension payable to people who attained State Pension Age before 6 April 2016. LGPS members were contracted out of S2P and paid a lower rate of National Insurance as a result.

Initially S2P was an earnings-related pension but from April 2009 it built up as a flat rate pension. It was replaced with the new single tier State Pension from 6 April 2016. You can find out more about the new State Pension on the Government website.

U

Underpin

When the LGPS changed to a career average scheme in 2014, older Scheme members were protected from the changes. This protection is known as the underpin. The underpin ensures that protected members get a pension that is at least as good as they would have received if the Scheme had not changed on 1 April 2014.

The underpin applies if you:

  • were an active member of the LGPS on 31 March 2012
  • were within ten years of your Normal Pension Age on 1 April 2012 (generally age 65)
  • haven’t had a break in active membership of a public service pension scheme of more than five years after 31 March 2012
  • haven’t taken any career average benefits from the LGPS before the date the underpin is worked out. This is the earlier of the date you leave the Scheme or age 65. It may be an earlier date for the small number of LGPS members who had a protected Normal Pension Age of 60.

The underpin can also apply if you were an active member of another public service pension scheme on 31 March 2012. The protection will only apply in the LGPS if:

  • you transfer the pension benefits from the other public service pension scheme into the LGPS
  • some or all of the transfer value buys final salary benefits in the LGPS
  • the break between leaving the other public service pension scheme and joining the LGPS is less than five years
  • you were within ten years of age 65 on 1 April 2012
  • you haven’t taken any career average benefits from the LGPS before the date the underpin is worked out. This is the earlier of the date you leave the Scheme or age 65.

The underpin will not apply if you:

  • leave without an immediate entitlement to benefits
  • elect to opt out of the LGPS before your protected Normal Pension Age (age 65 for almost all).

If you are protected, your pension fund will perform an underpin calculation on the earlier of:

  • the date you leave the Scheme
  • your protected Normal Pension Age (age 65 for almost all).

They will check that the pension you have built up in the career average scheme is at least as good as you would have built up in the final salary scheme. If it isn’t, your pension will be increased.

 

V

Vesting period

The vesting period is the length of time that you must be an active member of the LGPS to qualify for benefits in the Scheme. The vesting period in the LGPS is two years. You can meet the vesting period with less than two years’ membership in certain circumstances.

You will meet the two year vesting period if you:

  • have been a member of the LGPS in England and Wales for two years
  • transferred a pension into the LGPS from a different occupational pension scheme or from a European pensions institution and the length of service you had in that scheme plus your period of LGPS membership is more than two years
  • have transferred pension rights into the LGPS from a pension scheme or arrangement in which you were not allowed to have a refund of contributions
  • have previously transferred pension rights out of the LGPS to a pension scheme abroad – to a qualifying recognised overseas pension scheme
  • already hold a deferred benefit or you are receiving a pension from the LGPS in England and Wales, other than a survivor’s pension or a pension credit member’s pension
  • paid National Insurance contributions as a member of the LGPS and you stop paying into the LGPS in the tax year that you attain State Pension age
  • stop paying into the LGPS at age 75
  • die in service.