Whilst your Local Government Pension Scheme (LGPS) pension forms a very important part of your retirement planning it is important not to forget about your State Pension.
A new single tier, flat rate State Pension was introduced for people who reached State Pension age on or after 6 April 2016. It replaced the basic and additional State Pension that is payable to people who reached State Pension age before 6 April 2016. The additional State Pension was known as the State Earnings Related Pension Scheme (SERPS) from 1978 followed by the Second State Pension (S2P) from 2002. The amount of additional State Pension that you get is based on your National Insurance contributions.
The LGPS was ‘contracted out’ of the additional State Pension between 6 April 1978 and 5 April 2016. If you contributed to the LGPS during this time you paid a lower rate of National Insurance contributions and therefore you weren’t accruing much, if any additional State Pension. However, you were building up benefits in the LGPS instead. The rules changed on 6 April 2016 when contracting out was stopped; you will have paid the standard amount of National Insurance contributions from this date.
If you were a member of the LGPS between 6 April 1978 and 5 April 1997, you did not pay into SERPS. The LGPS guarantees to pay you a pension at least as good as you would have received from SERPS. This is called the Guaranteed Minimum Pension or GMP and will be part of your LGPS pension when you retire (not an additional amount).
From your State Pension age, payment of the increases to your pension may be shared between the North Yorkshire Pension Fund and the Government. This is because the Government is responsible for paying part of the cost of living increases on your GMP. The GMP part of your pension will receive a full increase even if the rest of your pension is receiving a proportion of the increase because you took payment of your pension part way through the year.
If you were a member of the LGPS between 6 April 1978 and 5 April 2016 and reach State Pension age after 5 April 2016, you are likely to receive a reduced amount of new State Pension. This is because you paid a lower rate of National Insurance contributions as the LGPS was contracted out of the additional State Pension. The amount of new State Pension that you receive will depend on your National Insurance record and how many qualifying years you have after April 2016.
In most cases the pension you get from the LGPS will be at least as good as the additional State Pension you would have received had you not been contracted out. When you retire, this will be shown as the Contracted Out Pension Equivalent (COPE) amount on your State Pension statement. This is an estimated figure based on all of the contracted out pension benefits you have built up during your working life. If you were a member of two or more contracted out pension schemes, the COPE amount will be based on all of these schemes. Further information is available in the Department for Work and Pensions factsheet.
Your Normal Pension Age (NPA) is the age that you can take your LGPS pension without any reduction for early payment. The NPA in the LGPS is linked to State Pension age. The Government has announced the earliest age that you can take your pension will increase from age 55 to 57 from 6 April 2028. This means that your NPA in the LGPS will change. This will apply to the pension you have built up in the LGPS after 31 March 2014.
If you were a member of the LGPS before April 2014, you have built up benefits in the final salary scheme. These benefits have a different NPA, which is age 65 for most members. You can find out more about the Normal Pension Age in the LGPS, on the LGPS member website.
If your State Pension age changes after you take your LGPS pension, this will not change the amount of pension that you receive.
You can find out more about the State Pension including your State Pension age, how your State Pension is calculated, how to get an estimate and whether you have any gaps in your National Insurance record on the government’s website.