Local Government Pension Scheme

By: EconomyWatch   Date: 9 October 2009

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The Local Government Pension Scheme (LGPS) is a government sponsored scheme in the UK that has been established to provide appropriate pension schemes for local government employees. However, the non-teaching staff of higher and further education institutions and non-local government employees can join this scheme with an agreement. Local authorities, called Administering Authorities, administer this scheme. The County Council supervises this scheme, ensuring that pension funds are invested appropriately.

The Benefits of Local Government Pension Scheme

The Local Government Pension Scheme is a final salary pension scheme that offers many benefits to its members.

According to the Local Government Pension Scheme, a pension of 50% of the final salary will be paid after 40 years of membership. A retiree will be offered up to 1½ times the final salary as a retirement grant. If a person dies, two times the salary will be paid as a lump sum to his or her nominees. Also, a death benefit guarantee of five years’ salary will be paid to the nominees.

Local Government Pension AVC (Additional Voluntary Contributions)

The Local Government Pension AVC is a savings plan designed to offer members a lump sum amount after retirement. It is a tax efficient way of saving for retirement. Pensioners consider this an additional pension or a lump sum amount for their retirement. AVC payments are deducted from a person’s salary before tax. In the UK, the total amount one can invest in an AVC scheme differs from county to county. For example, in Northern Ireland, one can invest up to 50% of the earnings into the scheme, whereas in Scotland, one can invest 100% of the earnings.

Tax Benefits of the Local Government Pension AVC Scheme

If you pay taxes, you will have immediate tax relief for your Local Government Scheme payments. The government limits the amount one can invest in an AVC scheme in a tax year. This is called the annual allowance. An increase in the value of your local government pension scheme or any other salary based scheme counts towards your total annual allowance.

You can increase your pension entitlements through a Local Government Pension AVC scheme. The contributions are deducted from your salary like a Local Government Pension Scheme.


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