You need an estimate of your pension benefits to be able to make your decision to take your pension.
We include 4 documents for your estimate. The letter and the conversion information provide your overview. The calculation summary and member account statement tell you how we worked it out.
If you paid Additional Voluntary Contributions (AVCs), you will have a fifth document called an AVC option statement.
The 4 main documents are:
1. Letter
The letter has important information. It includes information about how to apply for your pension benefits and where to return your forms.
2. Conversion information
The conversion information document shows your annual pension and your automatic tax-free lump sum. You receive an automatic tax-free lump sum if you have membership before 1 April 2008.
You can give up some of your annual pension to provide a tax-free lump sum or increase your automatic lump sum. This is known as conversion. There is a limit to how much pension you can convert.
The document shows:
- Standard benefits (no conversion) - this is your pension and lump sum before any conversion. If you have membership before 1 April 2008 an automatic lump sum is shown. If you do not have membership before 1 April 2008, the lump sum will show as £0.00
- Maximum conversion to lump sum - this is the maximum lump sum you can make (including any automatic lump sum) and the maximum reduced annual pension. Conversion does not work the other way. You cannot give up any of your automatic lump sum to increase your annual pension.
You do not have to choose either standard benefits or maximum conversion. You can choose a lump sum or pension anywhere between them. For every £1 of annual pension you give up, you receive £12 lump sum. Use the LGPS lump sum calculator. You can input figures to give examples of conversion. If you decide to take your pension, you must tell your employer. They will send you a letter and a retirement declaration form. It is on that form that you state your decision for conversion.
Example
You have standard benefits of an annual pension of £3,000 and no automatic tax-free lump sum.
You want to convert some of your annual pension to make a lump sum. You are prepared to give up £500 annual pension to make a tax-free lump sum. Giving up £500 annual pension makes a tax-free lump sum of £6,000 (£500 x £12).
You receive an annual pension of £2,500 for the rest of your life, and a one-off payment of £6,000 tax-free lump sum.
3. Calculation summary
The calculation summary document shows your personal details. It shows how we calculate your pension benefits.
On 1 April 2008, the formula to calculate Local Government Pension Scheme (LGPS) pensions changed. From 1 April 2014, the LGPS changed from a final salary to a Career Average Revalued Earnings (CARE) scheme. We show a split at these dates.
Pension benefits summary
This shows your annual pension and lump sum (retirement grant) at your estimated leaving date. It is before you might choose to convert some pension to lump sum.
Service (membership)
Service shows as:
- Service at 1/80th is your membership before 1 April 2008
- Service at 1/60th is your membership between 1 April 2008 and 31 March 2014
- CARE service is your membership after 1 April 2014.
If you are part-time your membership is pro rata. For example, if you work 18.5/37 hours and have paid into the scheme for 10 years, your membership is 5 years.
Your CARE service is shown but it is not used in the calculation of your benefits from 1 April 2014.
Annual pension
This shows how we calculate your annual pension. It includes reductions for taking your pension before normal pension age. Generally, we calculate your pension as follows:
- For membership before 1 April 2008: 1/80th x your final salary pensionable pay x membership
- For membership between 1 April 2008 and 31 March 2014: 1/60th x your final salary pensionable pay x membership
- Total CARE pension (membership after 1 April 2014): 1/49th x your actual pensionable pay each year. We revalue each year in line with the cost of living and add them together.
Retirement grant (lump sum)
This shows how we calculate your lump sum. It includes reductions applied for taking your lump sum before normal pension age.
4. Member account statement
The member account summary document shows your CARE pension account details. CARE pension builds up from 1 April 2014.
The scheme changed from 1 April 2014. Your pension builds up at a rate of 1/49th of your actual pensionable pay each year.
We add the years together and revalue them to keep up with the cost of living. This statement shows a breakdown of each year from 1 April 2014.
We show your pension built up before 1 April 2014 in the calculation summary document.