Why Should I Join the Pension Scheme?
At the NESPF, we are passionate about providing information on the Local Government Pension Scheme (LGPS) to ensure our members have the very best chance of futureproofing their finances. We are not financial advisors and so cannot give specific advice, but we strive to communicate the important facts about the scheme so members are empowered to make the best decisions for themselves. Our staff are often contacted by members who are about to join or in the process of joining the scheme, so this article will focus on the basics of becoming a member and the benefits it can bring.
Consider your Retirement
The vision we have for retirement will look different from person to person, but most people are likely to agree that the more money saved for retirement, the better when the time comes. It is worth thinking about how you envision your own retirement, do you plan to spend more time travelling the world or taking part in hobbies? Taking time to consider how much you will be spending day to day and month to month will give you an idea of what kind of budget you should be aiming for.
It can be difficult to think about the other expenses that will be present in your life, especially if retirement is still many years away. However it is worth noting that the State Pension only provides a basic level of income, and with life expectancy increasing (some of us could spend 20+ years in retirement), saving with the Local Government Pension Scheme (LGPS) can help propel your finances along.
How to Join
You will be automatically enrolled into the pension scheme if you are eligible to join. To be eligible you will need to:
- Work for a local authority or employer who offers membership to the pension scheme and
- Be under age 75, and
- Not be eligible to join another public service pension scheme such as teachers, police or fire fighters
The Benefits
The LGPS is one of the best ways to plan for retirement with a range of benefits. Unlike most private pension schemes, the LGPS is a defined benefit (DB) pension scheme. One of the main advantages of this is that you will be paid an income for the rest of your life. Other benefits include:
- A secure pension underwritten by Government, making it guaranteed by law – so you don’t have to worry about poor investments or economic downturns affecting your pension
- Your employer pays in too, covering around 2/3rds of the cost of your pension
- You will receive tax relief as your pay is taxed after your contributions have been deducted
- Security for your loved ones with pensions available for a spouse or partner, and any eligible children in the event of your death
- An additional tax-free lump sum of 3 x salary should you die in service
- Options to pay more or less – you can boost your pension by paying more or if you need to, you can reduce your contributions
- Option to convert some of your pension for a tax-free cash lump sum when you retire
- A pension which keeps up with the cost of living, so as prices rise, so too does your pension
- Early retirement is available from age 55
- Flexible, ill health and redundancy & efficiency retirements are available too
How Much will it Cost?
How much you will pay depends on how much you earn. When you first join and every April after, your employer will decide your contribution rate by comparing your annual pay with the Fund's contribution rates. These rates are set by the Government and are reviewed annually. If at any time your contribution rate changes your employer will let you know. You can view your contribution rate by using your calculator here.
Your employer also helps cover the cost of the pension scheme including administration and pension payments. Generally employers cover 2/3rds of the costs while members pay 1/3rd. In personal or private pensions, members would have to pay for all fees and contributions.
More Information
You can view more information about joining the scheme here. You can also explore the Publications and Forms section of our website for specific information about the LGPS.
