What type of Scheme is the LGPS?

Statutory Pension Scheme

A scheme established by Acts of Parliament and administered in line with statutory instruments (or regulations) issued by Communities and Local Government Office (CLG).

The current main scheme regulations in force effective from 1st April 2008 are:

Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007
Local Government Pension Scheme (Administration) Regulations 2008
Local Government Pension Scheme (Transitional Provisions) Regulations 2008

These regulations can be viewed on our website by clicking here.

Occupational Pension Scheme

The LGPS is available to all employees in Local Government or in other organisations that have chosen to participate in it. Teachers, Police Officers, Firefighters and employees eligible to join another Statutory Pension Scheme, such as the NHS Pension Scheme, are not allowed to join.

Defined Benefit Scheme

What this means is that the benefits paid from the LGPS are defined in legislation and therefore set out in law. There are set formulae and strict regulations governing how benefits are to be calculated and paid. An alternative to a defined benefit scheme is a Defined Contribution Scheme or Money Purchase Scheme. These schemes, whilst having certain regulatory controls, do not define the benefits to which a contributor will receive in the same way as the LGPS. Benefits payable from these schemes are based on the amount of money paid into them, the investment returns achieved on that money and the market conditions in force at the time that the benefits become payable.

Final Salary Pension Scheme

Rather than benefits being based on the contributions paid (as in a Defined Contribution or Money Purchase Pension Scheme as described above) benefits from the LGPS are based on the length of scheme membership that a member has built up and the final (pensionable) salary that the member has received normally during the last 365 days of employment.

Contracted-Out Pension Scheme

The term contracted-out refers to the "top-up" part of the State Pension Scheme, formally known as the State Earnings Related Pension Scheme (SERPS) but now called the State Second Pension (S2P). By being contracted-out of S2P, LGPS members pay a lower rate of National Insurance contributions as they do not contribute to S2P and therefore would not receive any top up to their basic State Pension for their periods of contracted-out employment. Instead, they pay LGPS contributions to provide for occupational pension benefits that are guaranteed to be at least as good as those offered by S2P (and generally are very much better). The Employer Contracting-out Number or ECON for the Berkshire Pension Fund is E3900002R and the Scheme Contracting-out Number or SCON is S2700137M.

Contributory Scheme

All members of the LGPS have to pay contributions into the Scheme. Employers also have to pay contributions into the scheme. Some schemes are non-contributory in which case pension benefits are provided to scheme members even though they have not paid any contributions.

Eightieth Pension Scheme (for membership up to 31st March 2008)

For each year and part year of membership a pension equal to 1/80th of final pay and a lump sum equal to 3/80ths of final pay is built up.

Sixtieth Pension Scheme (for membership after 1st April 2008)

For each year and part year of membership a pension equal to 1/60th of final pay is built up (there is no automatic lump sum for membership accrued after 1st April 2008)

Funded Pension Scheme

All contributions are paid into a Fund that is separate from all other local government finances. Many other schemes are "pay as you go" and therefore un-funded.

Registered Scheme

All contributions paid receive tax relief at source as the scheme is a registered public service pension scheme under Chapter 2 of Part 4 of the Finance Act 2004.

Related Links: