Joining the Scheme will not cost as much as you might think.
Tax Benefits – your contributions are taken from your pay before it is taxed which means you have less tax to pay.
On the 1st April 2014 the definition of pensionable pay was changed to include one fundamental difference, in that non contractual overtime and additional hours are now deemed pensionable and will therefore count towards your pensionable pay figure and have contributions deducted from it.
This means that the more you earn in a year the bigger your pension will be for that year. However, if your pay exceeds the threshold for the contribution banding you have initially been allocated you may find your employer adjusts your contribution rate to reflect the higher pay.
Your pension will be based on the actual pensionable pay you earn in each financial year i.e. the period between 1st April – 31st March. Each April, your employer will decide your appropriate rate of contributions for each employment by matching your actual pensionable pay to the appropriate band in the contributions table below.
This is the banding rate applicable at 1st April 2018, and these rates will be revalued in line with the Price Index each April.
|Pensionable pay banding||Main Section||50/50 Section|
|Up to £14,100||5.5%||2.75%|
|£14,101 to £22,000||5.8%||2.9%|
|£22,001 to £35,700||6.5%||3.25%|
|£35,701 to £45,200||6.8%||3.4%|
|£45,201 to £63,100||8.5%||4.25%|
|£63,101 to £89,400||9.9%||4.95%|
|£89,401 to £105,200||10.5%||5.25%|
|£105,201 to £157,800||11.4%||5.7%|
|£157,801 or more||12.5%||6.25%|
A ‘Contribution Calculator’ is available, the calculator requires you to input information including your annual pensionable pay, pay frequency, section of the scheme you are in/wish to join and whether you are over State Pension Age. The results include both the gross and net contribution amount for the scheme.
One of the key features of the LGPS is the ability to pay half rate contributions in exchange for half pension accrual, commonly known as the 50/50 option.
This may help some members who are temporarily unable, or have difficulty in paying the full amount of contributions if your financial circumstances change e.g. moving house, childcare costs, getting married etc. The 50/50 option will allow you to remain as an active member of the scheme and pay lower contributions rather than opting out altogether.
You would then still be able to take advantage of the benefits of being an LGPS member but contribute a lower, more manageable amount.
Further information on the 50/50 section is available here – 50/50 Scheme.