Understanding Pay in the LGPS

If a member joined the LGPS before 1 April 2014, they will have membership in the final salary scheme, and this is calculated in terms of calendar length, and prorated for part-time service. The ‘Final Salary’ scheme includes all earnings up to 31/03/2014, split into two different tranches of membership:

• Service prior to 01/04/2008, a benefits accrual rate of 1/80th is applied and the member receives an automatic lump sum of three times their annual benefits.
• Service 01/04/2008 – 31/03/2014, a benefits accrual rate of 1/60th is applied, but there is no automatic lump sum.

Career Average Revalued Earnings (CARE) scheme became effective from 1st April 2014 and replaced the final salary scheme. In this scheme, member benefits are directly linked to their actual pay.

• The accrual rate is 1/49th and each year the accrual rate is applied to each members’ actual earnings, and the amount is banked. Each year, on 1st April, pension pots are revalued in line with inflation.
• The accrual rate becomes 1/98th if the member has elected to be in the 50/50 section of the LGPS. The 50/50 section gives you the option of paying half the standard rate of contributions in return for half the amount of pension, while still retaining your full ill-health and life cover.

These are the types of reportable pay used for LGPS purposes that you will need:

• Final Pensionable Pay (also known as Final Salary/Pre-2014 pay/FTE Pay) – this is the Full-time equivalent pay for the last 365 days*
  *For term time staff (working fewer than 52 weeks) FTE is only required for the weeks that they are contracted (e.g. 46 weeks)
• Actual Pensionable Pay (also known as Main Section pay) – this is the actual pay received whilst contributing to the main section of the scheme from 1st April to leaving date
• 50/50 Section – this is the actual pay received whilst contributing to the 50/50 section of the scheme from 1St April to leaving date

Please refer to the relevant calculation documents in the downloads section for more information.

Assumed pensionable pay is a notional pensionable pay figure that is used to ensure that a member’s pension is not affected by any reduction to, or suspension of, their pensionable pay due to a period of sickness or injury, or any reduction due to relevant child related leave or reserve forces leave.

Application

APP is dropped into a member’s pension account for an employment (instead of any pensionable pay actually received in respect of that employment) when, and for the duration of which, any of the  following apply:

• A member is on reduced contractual pay or nil pay as a result of sickness or injury;
• A member is on relevant child-related leave (ie, ordinary maternity, paternity or adoption
• leave or paid shared parental leave and any paid additional maternity or adoption leave) and the
• pensionable pay they receive on a given day is not higher than the APP which they would otherwise have been treated as receiving; or
• A member is on reserve forces service leave (if the employee, although eligible to be in the Armed Forces Pension Scheme during that period, has elected to remain a member of the LGPS for that period).

APP is calculated as an annual rate then applied to the relevant period as a proportion of that rate;

• Calculate average of pensionable pay in the three complete months prior to APP becoming applicable
• Gross the average up to an annual figure
• Add in any pensionable lump sum payments

Please refer to the Assumed Pensionable Pay document in the downloads section for more information.