Example of final salary benefits
Let’s look at the final salary benefits built up by a member who:
- joined the LGPS on 1 April 2001
- worked full time throughout and has seven years membership before 1 April 2008 and six years membership between 1 April 2008 and 31 March 2014
- leaves the LGPS on 31 March 2018
- has final pay of £28,000, based on the period from 1 April 2017 to 31 March 2018.
For 1 April 2008 to 31 March 2014
Annual pension: 6 / 60th x £28,000 = £2,800
For 1 April 2001 to 31 March 2008
Annual pension: 7 / 80ths x £28,000 = £2,450
Plus a tax-free lump sum: 3 x 7/80ths x £28,000 = £7,350
The total annual pension would be £5,250, plus the value of pension built up in the pension account since 1 April 2014.
Tax free lump sum
As the member joined the LGPS before 1 April 2008, they automatically get a tax-free lump sum when they take their pension. Most members will be able to give up part of their annual pension in exchange for a tax-free lump sum. For every £1 of annual pension you give up you get £12 of lump sum. HM Revenue and Customs set a limit on how much you can get tax-free. The LGPS national website has a lump sum calculator to find out more about this option.
