Added years were a method to increase membership in the LGPS. This option is no longer available but existing arrangements continue from 1 April 2014 on the terms of the contract when they were originally taken out.
Additional Regular Contributions (ARCs)
ARC’s used to allow the purchase of additional scheme pension in steps of £250 per year, up to a maximum of £5,000. They replaced the purchase of additional service, although added years contracts in place before 1st April 2008 will still continue. ARCs have now been replaced by Additional Pension Contributions (APCs). Contracts that were taken out before ARCs ceased remain in place.
Additional Pension Contributions (APCs)
Additional Pension Contributions are a way to purchase additional pension regularly over a period of time, or through a one-off lump sum. The maximum amount of additional pension you can buy is £6,755 (this figure will increase each year in line with the cost of living).
Automatic Lump Sum
All scheme members who have membership built up before 31 March 2008 have an automatic lump sum at retirement, based on the membership until that date.
Additional Voluntary Contributions (AVCs)
These are extra payments to increase your future benefits. You can also pay AVCs to provide additional life cover. All local government pension funds have an AVC arrangement in which you can invest money through an AVC provider, often an insurance company or building society. AVCs are deducted directly from your pay and attract tax relief.
An admission body is an employer that chooses to participate in the scheme under an admission agreement. These tend to be employers such as charities and contractors.
Assumed Pensionable Pay
This provides a notional pensionable pay figure to ensure your pension is not affected by any reduction in pensionable pay due to a period of sickness or injury on reduced contractual pay or no pay, or relevant child related leave or reserve forces service leave. The assumed pensionable pay is calculated as the average of the pensionable pay you received for the 12 weeks (or 3 months if monthly paid) before the period of reduced pay or no pay for sickness or injury or before the start of the relevant child related leave or reserve forces service leave. This figure is then grossed up to an annual figure and then divided by the period of time you were on reduced pay or no pay for sickness or injury or on relevant child related leave or reserve forces service leave.
Automatic Enrolment Date
This is the earlier of:
- the day you reach age 22 provided you are earning more than £10,000 a year in the job, or
- the beginning of the pay period in which you first earn more than £10,000 in the job, on an annualised basis, provided you are aged 22 or more and under state pension age at that time.
Civil Partnership (Civil Partner)
A civil partnership is a relationship between two people of the same sex (civil partners) which is formed when they register as civil partners.
Career Average Revalued Earning scheme (CARE)
Guaranteed pension based on pay received for each scheme year over your membership. Each year’s pension is then revalued by inflation.
An eligible cohabiting partner is a partner you are living with who, at the date of your death, has met certain conditions for a benefit to be provided.
Consumer Prices Index (CPI)
The Consumer Price Index (CPI) is the official measure of inflation of consumer prices in the United Kingdom. This is currently the measure used to adjust your pension account at the end of every scheme year when you are an active member of the scheme and after you have ceased to be an active member. The adjustment ensures your pension keeps up with the cost of living.
LGPS members used to be ‘contracted out’. This was where members who paid NI contributions contributed towards the basic state pension but not towards the additional state pension known as SERPS or state second pension (S2P) under the old two tier state pension.
Contracting out ceased in April 2016 when the new single tier state pension came into force.
Defined Benefit Scheme
The benefits built up in a defined benefit (DB) scheme are fixed and calculated on the salary and service of a member. The Local Government Pension Scheme (LGPS) is such a scheme.
Defined Contribution Scheme
In a defined contribution (DC) scheme, a pension pot is built up by both the employer and the member paying contributions which are then invested. At retirement the member will traditionally secure their pension by purchasing an annuity. However, freedom and choice legislation introduced in April 2014 has allowed members to access their pension pot more flexibly.
Eligible children are your children. They must, at the date of your death:
- be your natural child (who must be born within 12 months of your death)
- be your adopted child
- be your step-child or a child accepted by you as being a member of your family (this doesn’t include a child you sponsor for charity) and be dependent on you.
Eligible children must meet the following conditions:
- be under age 18
- be aged 18 or over and under 23 and in full-time education or vocational training (although your administering authority can continue to treat the child as an eligible child notwithstanding a break in full-time education or vocational training)
- be unable to engage in gainful employment because of physical or mental impairment and either:
O has not reached the age of 23, or
O the impairment is, in the opinion of an independent registered medical practitioner, likely to be permanent and the child was dependent on you at the date of your death because of that mental or physical impairment.
An eligible jobholder is a worker who is aged a least 22 and under state pension age and who earns more than the annual amount of £10,000.
Freedom and Choice
Since 6 April 2015 members of certain pension schemes now have more freedom over how they take their money from their pension pot. These new flexibilities apply to members aged 55 or over, who have a pension based on how much has been paid into their pot (a defined contribution pension). These new flexibilities do not apply to defined benefit schemes, which includes the LGPS.
This is usually the pay in respect of your final year of scheme membership on which you paid contributions, or one of the previous 2 years if this is higher, and includes your normal pay, contractual shift allowance, bonus, contractual overtime (but not non-contractual overtime), maternity pay, paternity pay, adoption pay, and any other taxable benefit specified in your contract as being pensionable.
Normal Pension Age
Normal pension age is linked to your state pension age for benefits built up from April 2014 (but with a minimum of age 65), and is the age at which you can take the pension you have built up in full. If you choose to take your pension before your normal pension age it will normally be reduced, as it is being paid earlier. If you take it later than your normal pension age it is increased because it is being paid later.
A pay period is the length of time over which employee time is recorded and paid.
Each scheme year the amount of pension you have built up during the year is worked out and this amount is added into your active pension account. Your account is revalued each year to take account of the cost of living. This adjustment is carried out in line with the Treasury Revaluation Order index which, currently, is the rate of the Consumer Prices Index (CPI).
You will have a separate pension account for each employment. That pension account will hold the entire pension built-up for that employment.
In addition to an active member’s pension account there are also:
- a deferred member’s pension account;
- a deferred refund account;
- a retirement pension account;
- a flexible retirement pension account;
- a deferred pensioner member’s account;
- a pension credit account; and
- a survivor member’s account.
Pension Credit Member
An ex-spouse or ex-partner who has been granted a share of their former spouse/partners pension benefits in the LGPS through a Pensions Sharing Order.
Pension Debit Member
A member of the Local Government Pension Scheme whose pension benefits are subject to a Pension Sharing Order.
The pay on which you normally pay contributions is your normal salary or wages plus any shift allowance, bonuses, overtime (both contractual and non-contractual), maternity pay, paternity pay, adoption pay and any other taxable benefit specified in your contract as being pensionable. You do not pay contributions on any travelling or subsistence allowances, pay in lieu of notice, pay in lieu of loss of holidays, any payment as an inducement not to leave before the payment is made, any award of compensation (other than payment representing arrears of pay) made for the purpose of achieving equal pay, pay relating to loss of future pensionable payments or benefits, any pay paid by your employer if you go on reserve forces service leave nor (apart from some historical cases) the monetary value of a car or pay received in lieu of a car.
Survivors’ pensions can be paid to a widow, widower or civil partner and, subject to certain qualifying conditions, children and cohabiting partners.
Retirement Lump Sum
A one off lump sum paid on retirement. The amount that can be paid must be within HMRC limits.
Relevant Child Related Leave
Relevant child related leave includes periods of ordinary maternity, adoption or paternity leave (normally first 26 weeks) and any periods of paid additional maternity, adoption or paternity leave (normally after week 26 weeks up week 39).
Reserve Forces Service Leave
This occurs when a Reservist is mobilised and called upon to take part in military operations. The period of mobilisation can range from three months or less and up to a maximum of 12 months. During a period of reserve forces service leave you will continue to build up a pension based on the rate of assumed pensionable pay you would have received had you not been on reserve forces service leave.
The scheme year runs from 1 April to 31 March each year.
State Pension Age
This is the earliest age you can receive the state pension. State pension age is currently age 65 for men. State pension age for women is currently being increased to be equalised with that for men and will reach 65. State pension age is due to increase, visit the gov.uk website for more information.