Local Government Pension Scheme (LGPS)

The Local Government Pension Scheme (LGPS) is the pension scheme for most people working in local government and local public services in England, Wales and Scotland, and for a separate scheme in Northern Ireland. It is a defined benefit (DB) scheme, which means it provides a guaranteed income in retirement based on your salary and length of service, rather than on how investments perform¹.

It is also the largest funded public service pension scheme in England and Wales, and one of the few public sector schemes that holds real investments rather than paying pensions out of current tax revenue². That distinction matters: the LGPS is included in official statistics on funded occupational pension schemes, while unfunded schemes such as those for civil servants, teachers and NHS staff are not³.

For most members, the practical questions are simpler than the structure. What do I pay in? What do I build up? When can I take it? What happens if I leave, or if I am made redundant? This page answers those in turn.

How the LGPS works: a defined benefit pension built on your pay

A defined benefit pension is a workplace pension based on your salary and how long you have worked for your employer. It is sometimes called a final salary or career average scheme⁸. The LGPS is the career average kind: each year of membership earns you a block of pension, and the blocks are added together and increased over time.

That is different from a defined contribution (DC) pension, which is built up through contributions, tax relief and investment returns, with employer contributions if it is a workplace scheme⁹. In a DC scheme, the income you eventually get depends on how much is paid in and how the investments perform. In a DB scheme, the income is set by a formula, and the investment risk sits with the scheme, not with you.

The LGPS is a funded scheme, meaning it holds a pool of investments and pays benefits from that fund over time¹⁰. It is not the same as the State Pension, which is paid from National Insurance and is claimed when you reach State Pension age¹¹. The LGPS is a workplace pension on top of that.

For anyone who has moved between public service schemes, the LGPS also sits alongside the McCloud remedy, which corrected age discrimination in the transition to the 2015 schemes. The underpin period covers active membership from 1 April 2015 to the earlier of 31 March 2022 or a member's final salary normal pension age, which is usually 65¹².

Who can join the LGPS

The LGPS covers employees of local authorities, and many staff in schools, colleges and other local public bodies. Membership is normally automatic for eligible employees, and you can opt out if you want to, though opting out means giving up the employer contribution and the guaranteed income.

There are rules about what happens when you leave and re-join. If you opted out after 11 April 2015 with a deferred benefit, you will not be allowed to join that deferred benefit with your active pension account if you re-join the LGPS. You will have two separate pension accounts in the LGPS¹³.

If you have an LGPS pension already in payment and you re-join the scheme, the same applies: you cannot join an LGPS pension in payment with an active pension account, and you will have two separate sets of benefits¹³.

There is also a long-standing rule about survivor pensions for unmarried partners. For members who left service before 1 April 2008, a member had to have been in employment from 1 April 2008 for an unmarried partner to be eligible for a survivor pension¹⁴. That rule was the subject of a Supreme Court case in Northern Ireland in 2017, which found that a nomination requirement could not be applied in the way it had been.

Building your pension: 1/49th of pay each year, adjusted for inflation

Each year you are an active member, you build up a block of pension worth 1/49th of that year's pensionable pay. Those blocks are added together, and each one is increased each year in line with the Consumer Price Index (CPI)⁶. That is what makes the LGPS a career average scheme rather than a final salary one.

The inflation link is important. Public sector pensions are increased in line with CPI every April⁶. That means the pension you build up keeps pace with price inflation while you are a member and after you retire, though it does not keep pace with earnings growth.

You can also buy extra pension. Additional Pension can be bought in multiples of £250 of annual pension¹⁵. That is a way of increasing your retirement income within the scheme, rather than saving separately.

If you have a Guaranteed Minimum Pension (GMP) from a period of contracting out, different rules apply. Each year pension schemes have to increase the amount of GMP built up from April 1988 to April 1997 in line with living costs, capped at three per cent¹⁶. The percentage change in CPI applies, subject to a minimum increase of 0 per cent and a maximum increase of 3 per cent per annum¹⁷.

The 50/50 section: half the contributions for half the pension

The LGPS has a 50/50 section, which lets you pay half the normal contribution rate and build up half the pension in return. It is designed for members who want to stay in the scheme but reduce what they pay in for a period, for example after a change in circumstances.

Contribution rates in the LGPS are banded by pay. In the Local Government Pension Scheme in Scotland, for example, the top band applies a 12 per cent contribution rate on pensionable pay for earnings above £45,300¹⁸. Rates in England and Wales are set in the same banded way, though the bands and percentages differ.

The trade-off is straightforward: half the contribution, half the pension build-up for that period. You keep your life cover and ill health cover while you are in the 50/50 section, and you can move back to the main section at any time.

When you can take your pension: from 55, linked to State Pension age

The earliest you can take a private or workplace pension is usually 55, rising to 57 from April 2028⁴. That is the general rule across UK pensions, and it applies to the LGPS as well.

The age at which you can take your LGPS pension without reduction is your normal pension age, which is linked to your State Pension age. In the LGPS in Scotland, normal pension age was formerly 65 but is now equal to an individual's State Pension age⁵. The same link applies in England and Wales.

You can claim your State Pension when you reach State Pension age¹⁹, and the earliest you can get it is when you reach that age²⁰. You can make a claim for a UK State Pension up to 4 months before your State Pension age²¹. The State Pension age is currently 66 for everyone²², though it is rising.

Taking your LGPS pension before your normal pension age normally means it is reduced, because it is likely to be paid for longer. The reduction depends on how early you take it. If you take it after your normal pension age, it is increased.

Tax-free cash, ill-health and death-in-service benefits

When you take your LGPS pension, you can usually exchange some of it for tax-free cash. The general rule across pensions is that 25 per cent of your cash will be tax-free²³, and the LGPS follows that pattern, though the exchange rate for converting pension into cash is set by the scheme.

The lump sum and death benefit allowance counts a number of payments, including pension commencement lump sums, the tax-free element of UFPLS, serious ill health lump sums and death benefit lump sums²⁴. That allowance is a limit on how much tax-free cash you can take across all your pensions.

If you become too ill to work, the LGPS has ill health retirement provisions. These can pay an unreduced pension if you meet the scheme's medical conditions, and in some cases can pay an enhanced pension based on what you would have built up had you stayed in work.

Death in service benefits are also part of the scheme. If you die while an active member, a lump sum and a survivor's pension are normally payable. A nomination form tells the scheme who you want to receive any lump sum.

Transferring pensions into or out of the LGPS

You may be able to transfer pension rights into the LGPS from a previous employer's pension scheme, a self-employed pension plan, a pension buy-out policy, a personal pension plan, a stakeholder pension scheme or an Additional Voluntary Contributions (AVC) arrangement¹³. You may also be able to transfer in pension benefits from an approved overseas pension scheme¹³.

There is a deadline. You have a year from joining the LGPS to opt to transfer your previous pension, unless your employer and pension fund allow you longer¹³. In practice, you will generally have 12 months from joining the LGPS to opt to transfer your previous pension¹³.

You cannot transfer a pension credit into the LGPS¹³. And if you request a transfer more than a year after you join, the club transfer rules will generally not apply to final salary benefits transfers¹³.

Transfers out of the LGPS are more restricted. You can transfer your UK pension pot to another registered UK pension scheme²⁵, but transferring out of a defined benefit scheme means giving up a guaranteed income for life. The FCA sets out the process:

1. Check your current scheme allows transfers out²⁶.
2. Make sure you will not lose any benefits²⁶.
3. Decide which scheme to transfer into²⁶.
4. Check if you need to pay for financial advice²⁶.
5. Ask your current provider for a transfer value²⁶.
6. Ask the new scheme to start the transfer²⁶.

If you are thinking about transferring, the free Pension Wise service can help²⁷. The Government's free Pension Tracing Service can help you find lost schemes²⁸, and it is free online²⁸.

Pooling and megafunds: what the changes to LGPS funds mean for members

The LGPS is being reorganised. The bill would consolidate LGPS funds into LGPS megafunds². The requirement to report on the impact of local investments will instead apply to the pools⁷. The number of pools is being reduced from eight to six⁷.

The scale of the scheme is significant: it has 6.7 million members and a value of £400bn⁷. The Fit for the future consultation on modernising the LGPS's investment and governance arrangements, and to boost local investment, launched in November 2024⁷. The interim report of the pensions investment review set out proposals for the local government pension scheme on pooling assets and strengthening governance for consultation¹.

For members, the practical effect is limited. Your pension promise does not change because the assets are pooled differently. The benefits you have built up, the inflation link and the age at which you can take your pension are set by the scheme rules, not by how the investments are organised. The changes are about how the funds are managed and governed, not about what members receive.

Where to get help

If you have a complaint about your LGPS pension, the first step is usually the scheme's internal dispute resolution procedure. If that does not resolve it, the Pensions Ombudsman can look at complaints about pension schemes. The Financial Ombudsman Service can look at complaints about transfers from personal pension arrangements²⁹.

Free, impartial guidance is available from Pension Wise for anyone with a UK-based defined contribution personal or workplace pension²⁷. MoneyHelper provides free guidance on pensions and retirement⁴. Citizens Advice can help with preparing your finances for retirement³⁰.

If you are struggling with debt, free debt advice is available from charities and from Citizens Advice. If you have lost track of a pension, the Government's free Pension Tracing Service can help²⁸.