Active members

7/12/2021 1:53:38 PM

16. Glossary

A - Z

Glossary of Local Government Pension Scheme terms.

 

Active member

A member of a pension scheme who is building up pension benefits by paying contributions into the pension scheme on a regular basis.

Actuarial reduction

An actuarial reduction is applied to a member's accrued pension benefits. The reduction is to offset any extra cost arising from early payment of their retirement benefits.

Actuary

An actuary is a qualified, independent person, whose role is to value pension funds. 

Additional Pension Contributions (APCs)

If you are in the main section of the scheme you can pay more in contributions to buy extra pension. APCs are used to buy pension lost during certain periods of leave of absence on no pay or periods on no pay due to a trade dispute. Visit www.lgpsmember.org for an online quote.

Additional Voluntary Contributions (AVCs)

These are extra payments to increase your future benefits. You can also pay AVCs to provide extra life cover. AVCs are deducted from your pay and attract tax relief. Our Fund’s AVC providers are Scottish Widows and Prudential.

Administering Authority

In this instance, we are the 'Administering Authority'. We maintain member records, deal with member queries/requests, invest the Fund and pay your LGPS pension.

Admitted Body

An 'Admitted Body' is an employer who is carrying out work that is very similar in nature to a public service. Once the application to become an Admitted Body is approved, the Employer enters into a contractual arrangement with the administering authority so that its employees may join/remain in the LGPS.

Annual benefit statement

An annual process which produces a benefit calculation for every single member/employment held on our database. This excludes pensioners, employees who have left the scheme with no benefit entitlements and deceased members. The estimate is accurate as of the last complete financial year or, in the case of deferred statements, the member's date of leaving the authority.

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. If you have a period of reduced contractual or no pay due to sickness or injury or you have a period of relevant child related leave or reserve forces service leave then your employer needs to provide the pension fund with the assumed pensionable pay you would have received during that time. Your employer will calculate what your pay would have been for the period when you were on reduced contractual pay or no pay due to sickness or the period of relevant child related leave or reserve forces service leave. 

The assumed pensionable pay is the average of the pensionable pay you received for the 12 weeks (or 3 months if monthly paid) before the pay period in which you went on to reduced pay or no pay because of sickness or injury or before you started a period of relevant child related leave or reserve forces service leave. This figure is 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.

 

B

Beneficiary

A person who will receive a benefit payment from the scheme once certain events come to pass. For example, a spouse's pension paid on the death of a scheme member.

Benefits forecast/estimate

We can produce estimates which will give you a rough idea of what your pension is likely to be. The nearer you are to retirement age, the more accurate your estimate is likely to be. You can also produce your own pension forecasts at https://ms.buckscc.gov.uk

Best value

Legislation to make local authorities more accountable for their actions and expenditure. Local authorities are expected to simplify services and ensure that the public they serve are receiving good 'value for money'.

 

C

Certificate of protection

Certificates of Protection of Pension Benefits were intended to protect, for a period of up to 10 years, pension rights accrued by a scheme member who had been forced to accept a lower rate of pay or whose pay had been restricted.

Civil partnership

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

Club transfer rules

Club transfer rules allow certain final salary occupational pension schemes, mainly public service pension schemes, to calculate transfers on a special terms. Transfers into the LGPS, including final salary membership from other public sector club transfer schemes (usually membership up to 31 March 2015), or transfers out of the LGPS to other public sector club schemes (including final salary membership built up before 1 April 2014), provide benefits that are broadly equal across both schemes. Provided there is not a continuous break in active membership of a public service pension scheme of more than 5 years, any final salary membership transferred would buy a period of membership and keep a final salary link. We will provide you with further information on club transfers should this apply to you.

Consumer Prices Index (CPI)

The Consumer Price Index (CPI) is the official measure of inflation of consumer prices in the United Kingdom. This is the measure used to adjust your pension account at the end of every scheme year while you are an active member of the scheme. After you have ceased to be an active member, it is used to adjust (each April) the value of your deferred pension in the scheme and any pension in payment from the scheme. The adjustment ensures your pension keeps up with the cost of living.

Contracted-in/contracted-out

Up to 5 April 2016 the LGPS was contracted out of the State Second Pension (S2P). This meant that, up to State Pension Age, you paid reduced National Insurance contributions between the Lower Earnings Limit and the Upper Accruals Point (unless you opted to pay the married woman's/widow's reduced rate of National Insurance). The LGPS guarantees to pay you a Guaranteed Minimum Pension (GMP) for being contracted out of the State Earning Related Pension Scheme (SERPS) . For membership after 5 April 1997, the LGPS must pass the Reference Scheme test prescribed under the Pensions Act 1995.

Contributions

A regular amount of money paid into a pension scheme to guarantee you a pension at the end of your working career. Contributions into the LGPS will be between 5.5% and 12.5% of your actual pensionable pay and will be shown on your pay slip. Higher contribution rates can be paid through AVC or FSAVC plans.

 

D

Deferred member

A member who leaves the scheme with more than 2 years service (and hence becomes entitled to Deferred Benefits) is known as a Deferred Member. The member is not allowed to continue paying into the LGPS after leaving local government employment, unless they start work with another authority offering the LGPS at a later date.

Discretion

This is the power given by MHCLG to enable your employer or your administering authority to choose how they will apply the Scheme in respect of certain of its provisions. Under the LGPS your employer or your administering authority must consider the mandatory discretionary provisions. They must pass resolutions to form a policy of how they will apply the provision. In respect of the remaining discretionary provisions they are advised to do so. They have a responsibility to act with prudence and propriety in formulating their policies and must keep them under review. You can ask your employer or your administering authority what their policy is in relation to a discretion.

 

E

Early leaver

A member of the scheme who leaves before pension benefits are brought into payment, normally becoming entitled to preserved/deferred benefits.

Early retirement

A member who leaves the scheme, with immediate entitlement to benefits, before their normal pension age (NPA).

Earnings cap

If you joined the scheme on or after 1st June 1989, the earnings cap was the maximum pay that you could pay contributions on and upon which your benefits can be calculated. The figure was reviewed annually by the Government and increased in line with the Retail Prices Index and the final Earnings Cap for 2005/6 was £105,600. Please note that the Earnings Cap has ceased due to the new lifetime allowance limits introduced in the April 2006 regulations.

Eighty-five year rule

This was a method by which scheme members were allowed to retire early (rarely earlier than 60) and without a percentage reduction, if their age and total membership in the scheme totalled 85 years or more. It was withdrawn from the LGPS on 1st October 2006.

Eligible children

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), or
  • be your adopted child, or
  • 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, or
  • be aged 18 or over and under 23 and in full-time education or vocational training (although The Pensions & Investments Team can continue to treat the child as an eligible child notwithstanding a break in full-time education or vocational training), or
  • be unable to engage in gainful employment because of physical or mental impairment and either:
    • has not reached the age of 23, or
    • 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.

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 the following conditions for a continuous period of at least 2 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 husband and wife, or civil partners, and
  • neither you or your cohabiting partner have been living with someone else as if you/they were husband and wife or civil partners, and
  • either your cohabiting partner is, and has been, financially 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 a lot more than yours, he or she may pay the mortgage and most of the bills, and you may pay for the weekly shopping.

On your death, a survivor’s pension would be paid to your cohabiting partner if:

  • all of the above criteria apply at the date of your death, and
  • your cohabiting partner satisfies The Pensions & Investments Team that the above conditions had been met for a continuous period of at least 2 years immediately prior to your death.

You are not required to complete a form to nominate a cohabiting partner for entitlement to a cohabiting partner’s pension. However, you can provide the Pensions & Investments Team with your cohabiting partner’s details. We will require evidence upon your death to check that the conditions for a cohabiting partner's pension are met. 

Eligible Jobholder

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 (2020/21 figure).

 

F

Final Pay

This is usually the pay in respect of (i.e. due for) 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.
If you were part-time for all or part of the final year the whole-time pay that you would have received if you had worked whole-time is used and if your pay in your final year was reduced because of sickness or relevant child related leave, final pay is the pay you would have received had you not been on sick leave or relevant child related leave.

Flexible retirement

This allows you to start receiving some or all of their benefits from an earlier age (i.e. 55 years and over), yet continue working for their employer for several more years in exchange for reducing their hours and/or pay grade. Scheme members MUST have their employers consent in order to 'retire' in this manner. Please contact your employer’s Human Resources department and ask them for details of their Flexible Retirement policy.

FSAVC (Free Standing Additional Voluntary Contributions)

As opposed to an in-house AVC scheme (organised through our in-house providers; Scottish Widows and Prudential), a FSAVC is an arrangement you make independently of us with a pension provider of your choosing. Once you retire, you can use the contributions paid into your FSAVC to purchase extra pension from a provider of your choice. Note: you will only be able to buy this pension from us if you are paying into the in-house scheme.

 

G

Guaranteed minimum pension (GMP)

In agreeing to contract-out of S2P/SERPS, an employer must agree to guarantee a second pension of at least equivalent value had the member stayed paying into S2P/SERPS. This is the minimum pension that the LGPS must pay you, had you been a member of the LGPS on and between 6th April 1978 and 5th April 1997.

 

I

Ill health early retirement

A scheme member can retire from their employment if their illness prohibits them from permanently completing their employment duties. Ill health retirement will only apply to those cases where an Independent Registered Medical Practitioner qualified in occupational health has agreed that the member cannot return to their duties or any other "gainful employment". In the event that the retirement is agreed upon, all of the usual restrictions to retirement (age, pensionable service etc) are removed.

In-house AVC

The AVC scheme provided by an occupational pension scheme. Our current providers are Scottish Widows and Prudential.

 

L

Late retirement

This refers to a scheme member who works up to, and beyond, their normal retirement age. They will be eligible for benefit payments immediately, once the decision to leave their existing employment has been made. Members can remain in the LGPS up to age 75.

Local Government Association (LGA)

The LGA's primary function is to act as the representative for all of the local authority pension funds within the United Kingdom, particularly in their dealings with MHCLG. 

Local Government Pension Scheme (LGPS)

The occupational pension scheme available to all local government employees in England and Wales, including those employees who are entitled to join the pension fund under an admission agreement agreed with the local administering authority. It includes civilian members of Police and Fire Authorities and support staff at further education establishments, but NOT uniformed officers or teachers.

 

M

Member

An employee of the council and/or admitted bodies who, at some stage in their working career, has been a member of the Local Government Pension Scheme. 

 

N

Nominated cohabiting partners

A Nominated Cohabiting Partner is a partner on whom financial dependency or interdependency can be proven for at least two years. To be eligible for nominated partner status, both cohabiting partners must be free to marry/register their civil partnership.

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's being paid earlier. If you take it later than your Normal Pension Age it's increased because it's being paid later.

You can use the Government’s State Pension Age calculator (www.gov.uk/calculate-state-pension) to find out your State Pension Age. Please note that this calculator does not include proposed changes to State Pension Age.
Remember that your State Pension Age may change in the future and this would also change your Normal Pension Age in the LGPS for benefits built up from April 2014. Once you start drawing your pension any subsequent change to your State Pension Age will not affect your Normal Pension Age in the LGPS.
If you were paying into the LGPS before 1 April 2014 your final salary benefits retain their protected Normal Pension Age - which for most is age 65. However all pension benefits drawn on normal retirement must be taken at the same date i.e. you cannot separately draw your final salary benefits (built up before April 2014) at age 65 and your benefits in your pension account (built up from April 2014) at your Normal Pension Age (which for your benefits built up from April 2014 is linked to your State Pension Age but with a minimum of age 65).

 

O

Occupational pension scheme

A pension scheme to which only employees of a particular company or related group of employers is eligible to contribute. As soon as the employee leaves the employer, they will no longer be eligible to pay into the pension scheme.

 

P

Pension Account

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. Adjustments may be made to your account during the scheme year to take account of any transfer of pension rights into the account during the year, any additional pension you may have decided to purchase during the year or which is granted to you by your employer, any reduction due to a Pension Sharing Order or qualifying agreement in Scotland (following a divorce or dissolution of a civil partnership) and any reduction due to an Annual Allowance tax charge that you have asked the scheme to pay on your behalf. Your account is then revalued to take account of the cost of living. This adjustment is carried out in line with the Treasury Revaluation Order index which 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;
  • deferred refund account;
  • retirement pension account;
  • flexible retirement pension account;
  • deferred pensioner member’s account;
  • pension credit account; and
  • survivor member’s account.

These accounts will be adjusted by any debits for any Pension Sharing Order or qualifying agreement in Scotland (following a divorce or dissolution of a civil partnership) and for any Annual Allowance tax charge that you have asked the scheme to pay on your behalf. These accounts are currently adjusted each April in line with the Consumer Prices Index (CPI).

Pensionable pay

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.

Pensionable service

This can be accrued by working for us, Local Authorities or Admitted Bodies in a non-teaching capacity. The period of time you pay into the LGPS, whilst working in Local Government, is known as your Pensionable Service (See also total membership ).

Pensions increase

This is a figure applied annually (every April) to all active pensions paid by our pensioner payroll. It is a figure intended to offset the cost of living inflation, so in effect it preserves the value of a pension throughout its time in payment. Pensioners who have not been on pension for 1 full year or people retiring under the age of 55 (bar ill-health) do not qualify for the increase straight away. Rates can be found on our pensioner pages.

Pensions Ombudsman

The Pensions Ombudsman is responsible for investigating complaints and settling disputes which can arise between scheme administrators and scheme members. Pension schemes must follow the Ombudsman’s rulings, but scheme administrators are allowed to challenge the rulings in court if they so wish. Visit the Pensions Ombudsman website for further information.

Personal pension plan

This is an individual pension arrangement between a person and a financial company of their choosing. They generally offer a more flexible approach to pension contributions, whereas an occupational scheme is more geared towards accommodating a particular type of contributor/employee.

Preserved benefits

If you leave your local government employment with over 2 years pensionable service, you will become entitled to a 'Preserved Benefit' (sometimes referred to as 'Deferred Benefits'). You will receive a monthly pension (and, depending on when you stopped contributing to the LGPS, a one-off tax free lump-sum) from this preserved benefit when you reach normal retirement age (or earlier, depending on circumstances). If you would rather not receive a pension from our pension fund, you may elect to transfer your preserved benefit to another pension scheme (either another occupational scheme or a private pension).

Protected rights

The lowest amount of benefits that a Contracted-Out Money Purchase Scheme (COMPS) can pay to a member. The amount is worked out by using the money purchase method, with minimum contributions or minimum payments making up the payments to the fund.

Policy statement

This is a statement that your employer and your administering authority must produce, setting out the policies that they have resolved to follow in exercising certain discretions under the LGPS. Other discretions may also be included. You should be notified of the policies contained on the Statement and where changes are made, you should be notified within one month of the change occurring. You may ask your employer and your administering authority for the latest copy of their Policy Statements.

 

Q

Qualifying service

A period of service accrued in a previous employment, which, although not actually transferred to the new pensionable employment, does provide the scheme member with additional benefits (most notably in meeting membership dependant criteria such as the ’85-Year Rule’). The service itself does NOT contribute towards pension benefits accrued on this new employment. The majority of Qualifying Service is collected from previous Local Government employments.

 

R

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 up to week 39).

Remuneration

In the case of the LGPS, a persons pensionable remuneration is their last 365 days pay (certain payments are pensionable, others aren't - if in doubt, check with your payroll department). Please note, your pensionable remuneration will almost certainly be different (in most cases, lower) to your salary scale point, due to the final 365 days (for the majority) straddling two financial years.

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, if you elect to stay in the LGPS during that leave, 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.

 

S

Stakeholder pension scheme

These are designed to be low-charge, flexible and easy to use. They are intended for people who cannot pay into an occupational scheme or a suitable personal pension plan. One of the bonuses of such a scheme is that you can choose how much to pay into your pension as-and-when it suits you. When you eventually come to retire, you will use the money saved up to purchase a suitable pension from a personal pension provider.

State Second Pension (S2P) or State Earnings Related Pension Scheme (SERPS)

If a person in employment does not pay into an occupational or personal pension scheme, they will automatically pay into S2P/SERPS. As soon as an employee’s earnings exceed a lower earnings limit, payments are made to S2P/SERPS in the form of additional national insurance contributions. You cannot 'opt-out' of S2P/SERPS unless you have an alternative pension scheme to pay into.

State Pension Age

This is the earliest age you can receive the state basic pension.
In November 2018, State Pension age was 65 for men and women. State Pension age is gradually increasing and will reach 67 by 2028. State Pension age is going to be kept under review which means it could change again in the future.
Find out your State Pension Age

 

T

Total membership

This is the amount of membership that counts for:

Entitlement to a benefit:

  • The number of years and days that you have been a LGPS member (at full calendar length for part time employment).
  • The number of years and days purchased by a transfer into the LGPS from another pension arrangement.
  • Any part time employment prior to joining the LGPS which you have been allowed to count (at full calendar length).
  • Any additional years of membership purchased by you or purchased by converting AVCs into a period of membership.
  • It does not include any additional years of membership which have been granted to you by your employer.

Calculating a benefit

  • The number of years and days that you have been a LGPS member (with part time employment reduced to its whole time equivalent length).
  • The number of years and days purchased by a transfer into the LGPS from another pension arrangement.
  • Any additional years of membership that you have bought or which have been granted to you by your employer.
  • Any additional years of membership purchased by converting AVCs into a period of membership.
  • Any membership granted by way of ill health enhancement.

 

V

Vesting Period

The vesting period in the LGPS is 2 years. You will meet the 2 years vesting period if:

  • you have been a member of the LGPS in England and Wales for 2 years, or
  • you have brought a transfer of pension rights into the LGPS in England or Wales from a different occupational pension scheme or from a European pensions institution and the length of service you had in that scheme or institution was 2 or more years or, when added to the period of time you have been a member of the LGPS is, in aggregate, 2 or more years, or
  • you have brought a transfer of pension rights into the LGPS in England or Wales from a pension scheme or arrangement where you were not allowed to receive a refund of contributions, or
  • you have previously transferred pension rights out of the LGPS in England or Wales to a pension scheme abroad (i.e. to a qualifying recognised overseas pension scheme), or
  • you already hold a deferred benefit or are receiving a pension from the LGPS in England or Wales (other than a survivor's pension or pension credit member's pension), or
  • you have paid National Insurance contributions whilst a member of the LGPS and cease to contribute to the LGPS in the tax year of attaining pension age,
  • you cease to contribute to the LGPS at age 75, or
  •  you die in service.

 

W

Widow/er or civil partner's pensions

A pension paid to the surviving spouse/civil partner of a former pension scheme contributor. The spouse/civil partner's pension is a standard part of the benefits package open to LGPS members; no extra cost is required to fund this.

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Last updated: 12 July 2021

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