Glossary
A
Accrual rate
The rate at which you build up pension benefits whilst a member of the LGPS (whether under the final pay or CARE elements of the scheme). It is expressed as a fraction of your pay (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.
Automatic Enrolment
A work-based pension policy introduced by the Government from October 2012 onwards requiring employers to opt most employees into a workplace pension scheme automatically. It was introduced over a number of years, with larger employers required to meet the new requirements first and smaller employers phased in over a number of years. Workers can opt out at any time, but may be subject to re-enrolment every three years from the date the employer was first required to comply with the new rules. An employer cannot offer workers’ inducements (additional pay, holidays etc.) or encourage workers not to join or opt out of a workplace pension.
AVCs
Short for Additional Voluntary Contributions. This is one of the ways to increase your benefits.
C
Civil Partner
This means a person who you have formed a civil partnership with.
Cohabiting partner
A long-term partner you live with who may be able to receive a survivor’s pension following your death where the below criteria are satisfied at the date of your death: • you and your cohabiting partner must have been free to marry each other or to enter into a civil partnership, and • you and your cohabiting partner must have been living together as if you were spouses or civil partners, and • neither you nor your cohabiting partner may have been living with someone else as if you were spouses or civil partners, and • either your cohabiting partner must have been financially dependent on you or you both must have been financially interdependent on each other.
Contracting 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.
D
Deferred benefits
Your benefits are worked out when you leave the Scheme, based on the length of time you have been in the Scheme and your pay when you leave. 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 or transferred to another scheme.
Defined contribution pension scheme
A type of pension scheme where you build up a pension fund using your contributions and your employer's contributions (if they make any). Your money is invested to achieve investment returns, but the value of your pension fund can go up or down. When you retire you can take a tax- free lump sum from your fund and use the rest to secure an income - usually in the form of an annuity. Unlike in the LGPS, in defined contribution pension schemes there are no guarantees on how much you will receive. Most private sector employers offer their employees a defined contribution arrangement.
E
Eligible children
This includes your own children, adopted children, and certain other children who depend on you financially. They must normally be under 18, but can be as old as 23 if they carry on in full time education. It can also cover some adult children who cannot work because of a disability.
F
Final pay
Final pay 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 two years if that pay is higher.
G
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.
H
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 - but see cohabiting partner, above.
M
Membership
The length of time you have been in the Scheme. If you were a member of the final pay scheme, membership is used to work out your benefits and it includes any extra membership, for example any you transfer in from another pension scheme.
N
Normal Pension Age
Normal Pension Age is the age from which you can retire and receive your pension without reduction. Your Normal Pension Age in the LGPS is linked to your State Pension Age (with a minimum of age 65). You can check your Normal Pension age by looking up your current State Pension Age at www.gov.uk/calculate-state-pension.
P
Part time
You are part time if you work anything less than the number of hours your employer classes as standard full time hours.
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.
R
Rule of 85
The Rule of 85 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 of their pension benefits protected under this rule. As the rules governing the rule of 85 are complex you should contact us for details of how it may apply to you.
S
State pension age
The age you can draw your State pension. For people who have not yet reached this, their State Pension Age will be between 66 and 68. You can check your state pension age here www.gov.uk/calculate-state-pension.