Pensions and Lump Sums
If you have paid into the pension scheme for more than 3 months, you are entitled to a pension when you reach retirement age.
Your pension is paid for the rest of your life and will normally increase every April in line with inflation. We also pay spouses' and children's pensions if you die before or after retirement..
Option introduced to give up part of your pension for a tax free lump sum
Under the 'new look' Local Government Pension Scheme (LGPS) from 1 April 2008, pensions now build up at the rate of 1/60th with an option of a tax free lump sum, rather than the previous 1/80th with an automatic tax free lump sum of 3/80ths. Some of the 1/60th pension can then be converted into a tax free lump sum if you wish. You can, subject to certain limits, give up part of your pension to provide you with a bigger tax free lump sum at the rate of £1 of pension for each £12 of tax free lump sum, subject to a maximum of 25% of the capital value (as determined by HMRC) of your benefits
Example of pension and lump sum option calculation for membership after 31 March 2008.
On retirement at age 65, a Scheme member has 20 years total membership and has a final pay of £15,000.
- Their annual pension is 20 x 1/60 x £15,000 = £5,000
If they decide to give up £1,000 pension for a cash lump sum then:
- Their reduced annual pension is £5,000 less £1,000 = £4,000
- And they will get a tax free lump sum of £1,000 x 12 = £12,000
If the same employee had worked half time (i.e. 20 years at half time = 10):
- Their annual pension would be 10 years x 1/60 x £15,000 = £2,500
If they decide to give up £500 pension for a cash lump sum then:
- Their reduced annual pension is £2,500 less £500 = £2,000
- And they would get a tax free lump sum of £500 x 12 = £6,000
If you joined the LGPS before 1 April 2008
Your benefits from membership before 1 April 2008 are calculated differently. For LGPS membership you have built up to 31 March 2008 you receive an annual pension based on 1/80th of your final year's pensionable pay and an automatic tax-free lump sum of three times your pension. Like the pension, the automatic lump sum is based on your LGPS membership before 1 April 2008 and your final year's pensionable pay. You can also exchange part of your pre April 2008 pension for extra tax free lump sum as described above.
You will recieve an annual benefit statement every year which will give you an illustration of your pension benefits.
We cannot pay your pension until we have received your final pay figure from your payroll department as it is a final salary scheme.
Pay Protection
If your pay has been reduced in the final 3 years of employment, your payroll department should select the best 12 month figure from the last three years which ends with the anniversary of the date that you left. It is possible for the average of 3 consecutive years from the last 13 to be used, at your request.
You can find more information about the pension and lump sum in the following factsheets or in our Brief Guide to the New Scheme.
Wiltshire Pension Fund, Wiltshire Council - Bythesea Road,Trowbridge, Wiltshire, BA14 8JJ.
© 2009 Wiltshire Pension Fund.
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