50/50 section

Members of the LGPS can elect to enter the 50/50 section of the scheme. Under the 50/50 section members pay half their normal pension contribution rate and receive half the normal pension build up.

Accrual rate

The formula used to describe the rate at which you build up pension benefits whilst a member of the LGPS (whether under the final salary or CARE elements of the scheme). It is expressed as a fraction (e.g. 1/60th, 1/80th, 1/49th). The lower the bottom number, the better the pension benefit you will receive for an equivalent amount of pensionable service.

Actuarial Reduction (also called percentage reduction)

The amount by which a scheme member's pension and lump sum benefits are reduced if they are withdrawn before the date of normal retirement.

Actuarial Valuation

A three yearly valuation of the Fund undertaken by the Actuary to ensure that the Pension Fund is sufficiently well managed and that its assets meet its liabilities. Employer contribution rates are set as part of the valuation process.

Additional Voluntary Contributions (AVCs)

AVCS are additional payments you make to build up extra savings for your retirement. 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. AVC contributions are deducted directly from your pay before your tax is worked out, so, if you pay tax, you receive tax relief automatically.

Admission Body

An admission body is an employer that chooses to participate in the scheme under an admission agreement (such as charities and contractors).

Annual Benefit Statement      

Each summer we send members a summary of the benefits that we currently hold for them (based on the value of benefits as of 31st March that year). These amounts are calculated based on the information that employers send to us.

Assumed Pensionable Pay (APP)

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.

This notional pay figure is used to make sure an employee’s pension accrues in the same way as it would if they were at work receiving normal pay. There is also a bitesize training session on how to calculate APP.

Assumed pensionable pay is also used to work out any enhancement to your pension awarded because of ill health retirement, any lump sum death grant following death in service, and any enhancement which is included in survivor benefits following death in service. To see how this works refer to the ill health retirement section on the LGPS website

Automatic Enrolment

To help people save for their retirement the Government requires all employers in the UK to automatically enrol their employees into a workplace pension if they meet certain requirements. This is known as automatic enrolment and already happens in the LGPS, with most new employees automatically joining the Scheme when they commence employment.

Automatic Enrolment Date

Under automatic enrolment if you are not already a member of the LGPS, you will automatically join the Scheme at the point in the future that you:

  • have a contract of employment of three months or more.
  • earn over £10,000 a year (or pro-rata pay period).
  • are age 22 or over; and
  • are under State Pension age.

See the section on automatic enrolment above for more information.

Beneficiary

A person to whom payments from the LGPS may be paid to upon your death.

Civil Partnership

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 occupational pension schemes, mainly public service pension schemes, to calculate transfers on special terms.

Cohabiting partner

A long-term partner you live with who satisfies the necessary criteria.

Contracted Out

From 6 April 1978 to 5 April 2016 members of the LGPS paid a reduced rate of national insurance contribution by virtue of being contracted out of the State Earnings Related Pension Scheme SERPS - known later as the State Second Pension or S2P. From 6 April 2016, members of the LGPS have not been contracted out and have been paying the full rate of national insurance contributions. The amount extra that you may be paying will depend on your salary.

Consumer Price Index (CPI)

The Consumer Price Index (CPI) is the official measure of inflation of consumer prices in the United Kingdom. It measures the average change from month to month in the prices of goods and services purchased by most households in the UK. This is the measure used to determine increases to pension payments within Local Government Pension Schemes such as the East Sussex Pension Fund (this helps your pension keep track with the cost of living).

Career Average Revalued Earnings (or CARE) scheme

In a CARE scheme the pensionable pay for each year of membership is used to calculate a pension amount for that particular year. That pension amount is then revalued each year in line with inflation (it should be remembered that, while your CARE pension might be expected to increase each year, the pension amount could be reduced should there be negative inflation). These individual pension amounts are then added together to arrive at the total pension payable from the scheme.

From 1st April 2014 the LGPS became a Career Average Revalued Earnings (or CARE) scheme.  A CARE scheme calculates pension using the formula:

Pension = Accrual Rate x Pensionable Pay

In the LGPS the accrual rate for the main scheme is 1/49th.

Death Grant       

If a member dies in service or shortly after retiring, a lump sum amount of money will be due. Normally this Death Grant will be paid to the person(s) nominated on the Expression of Wish Form (beneficiary) unless the Pension Fund has any reasons not to do so (e.g., because it was signed a considerable time ago or the nominated person is deceased). In the absence of an expression of wish form, the death grant will normally be paid to the person's estate.

Deferred benefits

Your benefits are worked out when you leave the Scheme, based on the amount of membership you have built up and your pay when you leave, in the same way as for retirement. They are then held in the Scheme where they increase in value every year in line with the cost of living, until they are put into payment.

Designating Body

Designating bodies are bodies which can designate employees for access to the scheme (for example employees of town and parish councils, voluntary schools, foundation schools). 

Discretion

This is the power given by the LGPS to enable your employer or your pension fund administering authority to choose how they will run the scheme in respect of certain provisions. These are called discretions. Your employer and pension fund administering authority are obliged to consider how to exercise their discretion and, in respect of some (but not all) of these discretionary provisions, to have a written policy on how they will apply their discretion. For example, your employer must have a written policy on whether they will allow flexible retirement. They have a responsibility to act with 'prudence and propriety' in formulating their policies and must keep them under review.

Early Retirement

A term used to describe the payment of pension and lump sum to a member before the member has attained normal retirement age.

Eligible Dependent Children

This includes your own children, adopted children, and certain other children who depend on you financially. They must normally be under 17 but can be as old as 23 if they carry on in full time education. It can even cover some adult children who cannot work because of a disability. Here is some further information on Eligible Dependent Children.

Eligible Cohabiting Partner

An eligible cohabiting partner is a partner you are living with who, at the date of your death, has met all 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 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 or your cohabiting partner have 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, financially dependent on you or you are, and have been, financially interdependent on each other.

More information on Eligible Cohabiting Partner.

Eligible Jobholder

An eligible jobholder will be automatically enrolled in the LGPS. They are workers who are aged 22 or more, earning over £10,000 a year (or pro-rata in any pay period) and are under State Pension age.

Expression of Wish Form        

A form for a Scheme Member to state who they would like any Death Grant to be paid to should they die in service or shortly after when they retire.

Final Pay

Normally this means the pay you received in the last year up to leaving that you pay pension contributions on or one of the previous 2 years if this is higher.

Final Salary Pension Scheme

A Final Salary Pension Scheme (also known as a defined benefits scheme) is a type of pension. Instead of building up a pension pot over time, it provides you with a guaranteed annual income for life, based on your final or average salary (hence the name).

Gainful employment

Gainful employment is defined in the scheme rules as any type of paid work, for at least 30 hours a week over a period of at least 12 months.

Guaranteed Minimum Pension (GMP)

The LGPS guarantees to pay you a pension that is at least as high as you would have earned had you not been contracted out of the State Earning Related Pension Scheme (SERPS) at any time between 6 April 1978 and 5 April 1997. This is called the Guaranteed Minimum Pension (GMP). 

Husband or wife

This means your legally married husband or wife. It does not include a 'common law' husband or wife or someone you are living with as husband or wife - see Eligible Cohabiting Partner above.

Index Linking

A term used to describe the inflation proofing of LGPS benefits in line with the Consumer Prices Index (CPI).

Membership

Your membership is used to work out your benefits and is based on how long you have been a member of the Scheme (plus any additional membership, for example money you transfer in from another pension scheme).

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 in full. If you choose to take your pension before your Normal Pension Age it will normally be reduced and if you take it later, it will increase. You can check your Normal Pension age by looking up your current State Pension Age.

Occupational Pension Scheme

These schemes are also called company pension schemes. It's a scheme set up by an employer to provide pension or death benefits for its employees.

Part time

You are part time if you work less hours than your employer classes as standard full-time hours.

Pension account

Each scheme year the amount of pension you have built up during the year is calculated and added into your pension account. You will have a separate pension account for each employment which will hold the entire pension built-up for that employment.

Pension credit

A pension credit is a share of an ex-spouses or ex-civil partner's pension benefits, as awarded by a Court under a Pension Sharing Order, or by a qualifying agreement in Scotland, following a divorce or a dissolution of a civil partnership.

Pensionable Pay

Pensionable pay is the amount of pay on which you pay contributions. It includes basic pay, plus some other extras such as bonus, shift allowances and voluntary overtime. It does not include things like mileage or expenses.

Public Service Pension Scheme

A public sector pension is a workplace pension for public sector employees, for example teachers, NHS workers and civil servants. Many public sector pensions are defined benefit pensions, such as the Local Government Pension Scheme.

Rates and Adjustment Certificate

A certificate issued by the Actuary following a valuation of the Fund which sets out the employer contribution rates payable by each of the associated scheme bodies.

Registered Scheme

A scheme approved by HM Revenue & Customs under the Finance Act 2004. The LGPS is a Registered Public Scheme under Chapter 2, Part 4 of that Act.

Relevant Child Related Leave

Relevant child related leave includes periods of Ordinary Maternity, Adoption or Shared Parental Leave (normally first 26 weeks), Paternity Leave and any periods of paid Additional Maternity or Adoption Leave (normally after week 26 up to week 39) or paid Shared Parental Leave. 

Reserve Forces 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. 

Rule of 85

The Rule of 85-year rule is not a form of retirement, but rather a mechanism to determine the earliest point at which benefits could be taken voluntarily from the LGPS without suffering an early retirement reduction. The rule is satisfied if your age and scheme membership (in whole years) at the date you draw your benefits add up to 85. It was abolished on 1st October 2006, although some scheme members contributing to the LGPS before that date may have some or all their pension benefits protected under this rule. As the rules governing the rule of 85 are complex you should contact your Fund administrator for details of how it may apply to you.

Scheduled body

A schedule body is an employer who must provide automatic admission into the pension scheme for each eligible employee they employ- such as County Councils.

Scheme Year

The scheme year runs from 1 April to 31 March each year. 

SERPS (State Earnings Related Pension Scheme)

This is the extra earnings-related part of the state pension that employed people could earn up to 5 April 2002. LGPS members were automatically contracted out of SERPS, and most paid lower national insurance contributions as a result. SERPS was replaced by the State Second Pension (S2P) from 6 April 2002. 

Standard Lifetime Allowance

The value of pension benefits an individual can build up before a lifetime allowance charge is applied.

State Pension Age

The age you can draw your state pension. Traditionally this was 65 for men and 60 for women, although it is now later for most people. You can use the Government's State Pension Age calculator to find out your state pension age.

State Second Pension (S2P)

The State Second Pension (formerly SERPS) was the additional state pension, payable to individuals from State Pension Age if they attained State Pension Age before 6 April 2016. Initially, S2P was an earnings-related pension but from April 2009 it began building up as a flat rate pension until 6 April 2016 when it was replaced with the new single tier State Pension. Here is more information about the new State Pension.

Tax-Free Lump Sum     

An amount of cash set by law that you can take at retirement free of tax.

Transfer Value

The actuarial value of:

  1. a member's benefits paid to an alternative pension scheme on leaving the LGPS as an alternative to deferred benefits or a refund of contributions; or
  2. a member's benefits paid by a previous employer into the LGPS upon joining the scheme.Vesting Period

The vesting period refers to the period that you must be an active member of the LGPS before you are entitled to benefits under the scheme. The vesting period in the LGPS is 2 years, however, it can be met before 2 years in certain circumstances. For more detail visit the vesting period page on the LGPS site.

Workplace pension reform

The workplace pension reforms came into effect in October 2012. Phased in over several years from that date employers had to automatically enrol eligible workers into a qualifying pension scheme which meets certain criteria and make minimum contributions towards their retirement savings. This is popularly known as automatic enrolment.

 

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