Local Government Pension Scheme: How the LGPS Works

Learn how the Local Government Pension Scheme (LGPS) works, including pension calculations, contribution rates, the 50/50 section, early retirement, lump-sum options, pension transfers and ways to increase your retirement benefits.
Local Government Pension Scheme
The Local Government Pension Scheme (LGPS) is a workplace pension available to millions of people working for local government and certain other organisations in England and Wales. Unlike many private workplace pensions, the LGPS is a defined benefit pension scheme. Your retirement income is based on your pensionable pay and the pension you build up during your membership rather than simply depending on the value of an investment pot. If you are already a member or considering a job that offers the LGPS, understanding how contributions, pension build-up and retirement work can help you plan your finances more effectively. In this guide, we explain the Local Government Pension Scheme in simple terms, including how your pension is calculated, current contribution rates, the 50/50 option and what happens if you retire early.

What Is the Local Government Pension Scheme?

The Local Government Pension Scheme is a public service workplace pension scheme for eligible employees. It is offered by local government employers as well as certain other organisations participating in the scheme. Eligibility depends on factors including your employer, your job and your age. The LGPS is different from a typical defined contribution workplace pension. With a defined contribution pension, you and usually your employer pay money into an investment pot. The eventual value depends partly on contributions and investment performance. The LGPS instead promises retirement benefits calculated according to the scheme’s rules. For benefits built up from 1 April 2014, the LGPS operates as a Career Average Revalued Earnings (CARE) scheme.

How Does the Local Government Pension Scheme Work?

For membership from 1 April 2014, you build up a portion of your pension each year based on your pensionable pay. In the main section of the scheme, 1/49th of your pensionable pay is added to your pension account each year. The balance is then adjusted in line with the cost of living according to LGPS rules.

Simple LGPS calculation example

Suppose your pensionable pay for a scheme year is £35,000. Your pension earned for that year would initially be: £35,000 ÷ 49 = approximately £714.29 a year This does not mean £714.29 is placed into an investment account. Instead, approximately £714.29 is the annual pension you have built up for that year under the scheme, before applicable future adjustments. The process repeats as you continue to build benefits. Your actual retirement benefits can be more complicated, particularly if you have service from before April 2014.

Is the LGPS a Final Salary Pension?

The current LGPS is primarily a career average scheme rather than a final salary scheme. However, members who joined before 1 April 2014 may also have benefits calculated under previous final salary rules. Broadly:
  • Benefits built up from 1 April 2014 use the CARE system.
  • Membership from 1 April 2008 to 31 March 2014 generally builds pension at 1/60th under the relevant final salary rules.
  • Membership before 1 April 2008 generally uses a 1/80th pension calculation and includes an automatic lump sum under the applicable rules.
This is why someone with a long LGPS membership history may see different sections on their pension statement.

Local Government Pension Scheme Contribution Rates

The amount you personally contribute to the LGPS depends on your pensionable pay. For the 2026/27 scheme year, employee contribution rates in the main section range from 5.5% to 12.5%.
Pensionable Pay Main Section Contribution
Up to £18,400 5.5%
£18,401–£29,000 5.8%
£29,001–£47,300 6.5%
£47,301–£59,800 6.8%
£59,801–£84,000 8.5%
£84,001–£119,100 9.9%
£119,101–£140,400 10.5%
£140,401–£210,700 11.4%
£210,701 or more 12.5%
Your employer determines which contribution rate applies to you based on your pensionable pay. If you earn enough to pay Income Tax, your LGPS contributions normally receive tax relief when deducted from your pay. Contribution bands can change, so always check the latest figures with your employer, pension fund or the official LGPS contribution rates member website.

How Much Will My Local Government Pension Be?

There isn’t one fixed answer because your LGPS pension depends on your individual circumstances. Important factors can include:
  • Your pensionable pay
  • How long you remain an LGPS member
  • Whether you use the main or 50/50 section
  • Benefits accumulated before April 2014
  • The age at which you take your pension
  • Cost-of-living adjustments
  • Additional pension arrangements
  • Any applicable early or late retirement adjustments
Your annual benefit statement is therefore important when assessing what you have already built up. You can also use a Local Government Pension Scheme calculator to model potential pension outcomes, but any online estimate should be treated as illustrative rather than a guaranteed quotation from your pension fund.

What Is the LGPS 50/50 Section?

The LGPS includes a 50/50 section designed to help members remain in the scheme when paying the full contribution becomes difficult. Under the 50/50 option:
  • You pay approximately half your normal employee contribution rate.
  • You build up half the normal pension during that period.
  • You retain full life and ill-health cover.
For example, someone whose normal contribution rate is 6.5% would pay 3.25% in the 50/50 section under the current bands. The 50/50 section is intended primarily as a short-term alternative to completely opting out of the LGPS.

When Can I Take My Local Government Pension?

Your Normal Pension Age is important because taking LGPS benefits before that point can result in reductions. Benefits are normally payable unreduced from your Normal Pension Age, subject to the rules applying to your benefits. It may be possible to take benefits earlier. However, an early-retirement reduction may apply because the pension is expected to be paid for longer. Similarly, eligible members may be able to delay taking their pension beyond Normal Pension Age, with applicable adjustments. Because retirement rules and reduction factors can change, check the current LGPS rules before making retirement decisions.

Can I Take My LGPS Pension Early?

Yes, subject to the scheme rules, you may be able to take your LGPS pension before your Normal Pension Age. However, taking it early will commonly mean receiving a permanently reduced annual pension. The size of the reduction depends on how early you take your benefits and the rules applicable at the time. For this reason, comparing different retirement ages can be valuable when planning your retirement.

Can You Take a Lump Sum From the LGPS?

Your lump-sum options depend partly on when you built up your benefits. Membership before 1 April 2008 generally includes an automatic lump sum under the old scheme rules. For other benefits, members may generally have the option to exchange part of their annual pension for a tax-free lump sum, subject to LGPS rules and applicable tax limits. Taking more as a lump sum normally means receiving less annual pension. Consider both your immediate cash requirements and your expected long-term retirement income before making this decision.

What Happens to Your LGPS Pension If You Leave Your Job?

Leaving your employer does not necessarily mean losing the pension you have already built. Depending on your circumstances and qualifying membership, your benefits may become deferred benefits, which you can claim later under the scheme rules. In some situations, you may also be able to transfer pension benefits to another pension arrangement. Pension transfers can have significant long-term consequences. Compare the benefits and protections of both schemes carefully and consider regulated financial advice where appropriate.

Can I Transfer Another Pension Into the LGPS?

You may be able to transfer benefits from another pension into the LGPS. The treatment depends on the type of pension being transferred. The official LGPS guidance states that members will generally have 12 months from joining the LGPS to elect to transfer previous pension rights, although you should contact your pension fund about the rules applying to you. Transferring a pension is an important financial decision, so don’t assume combining pensions is automatically better.

Can I Pay More Into My Local Government Pension?

Yes. The LGPS provides options for members who want to increase their retirement benefits. Depending on your circumstances, these may include Additional Pension Contributions (APCs) and Additional Voluntary Contributions (AVCs). These options work differently, so consider what you are trying to achieve before choosing one. For example, buying additional pension through an APC is different from building a separate investment-based AVC pot. Check the options offered by your LGPS fund and consider professional financial advice if you are unsure which approach suits your circumstances.

Is the Local Government Pension Scheme Good?

The LGPS offers several features that can make it a valuable part of an employee’s overall benefits package. These include:
  • Defined retirement benefits
  • Employer contributions
  • Cost-of-living adjustments under scheme rules
  • Tax relief on eligible employee contributions
  • Survivor and death benefits
  • Ill-health retirement protection
  • The option to pay less temporarily through the 50/50 section
  • Options to increase retirement benefits
However, whether the scheme is suitable for you depends on your circumstances. For most people, it is useful to consider the pension as part of their overall employment package rather than looking only at the amount deducted from monthly salary.

How to Estimate Your Local Government Pension

To get an idea of your potential LGPS retirement income:
  1. Check your latest annual benefit statement.
  2. Confirm your current pensionable pay.
  3. Review benefits you have already accumulated.
  4. Decide approximately when you intend to retire.
  5. Account for any pre-2014 LGPS membership.
  6. Consider whether you are in the main or 50/50 section.
  7. Model different retirement scenarios using a pension calculator.
  8. Ask your pension fund for an official estimate before making major retirement decisions.
A calculator can be particularly useful for comparing scenarios, such as retiring earlier versus waiting until your Normal Pension Age.

Frequently Asked Questions

What is the Local Government Pension Scheme?

The Local Government Pension Scheme is a public service workplace pension for eligible local government employees and workers at certain participating organisations. In England and Wales, benefits built up since April 2014 generally operate on a Career Average Revalued Earnings basis.

How is an LGPS pension calculated?

In the main section, you generally build a pension equal to 1/49th of your pensionable pay for each scheme year under the post-April 2014 CARE scheme. The pension account is then adjusted in line with the cost of living according to scheme rules.

How much do I pay into the LGPS?

For 2026/27, employee contribution rates in the main section range from 5.5% to 12.5% of pensionable pay, depending on your pay band. Contribution bands are reviewed periodically and may change.

Is the LGPS a defined benefit pension?

Yes. The LGPS is a defined benefit pension scheme. Your pension benefits are calculated according to scheme rules rather than simply being determined by the value of an individual investment pot.

Can I take my LGPS pension early?

You may be able to take your pension before your Normal Pension Age, subject to LGPS rules. Taking benefits early can result in a permanent reduction because your pension is expected to be paid for longer.

What is the LGPS 50/50 scheme?

The 50/50 section allows you to pay half your normal employee contribution and build up half the normal pension during that period. You retain full life and ill-health cover while participating in the 50/50 section.

Does my employer contribute to my LGPS pension?

Yes. Both employees and employers contribute to funding the LGPS. However, because the LGPS is a defined benefit scheme, your retirement pension is not simply your contributions plus your employer’s contributions.

Can I calculate my LGPS pension online?

You can use an LGPS pension calculator to estimate potential benefits. However, online calculations are estimates and should not replace your annual benefit statement or an official retirement quotation from your LGPS pension fund.

Conclusion

The Local Government Pension Scheme provides eligible workers with a defined benefit pension based on their pensionable pay and scheme membership. For benefits built up under the post-2014 CARE scheme, members in the main section generally add 1/49th of their pensionable pay to their pension account each year. Members also have options around paying less, paying more and choosing when to take their benefits. Understanding these rules can help you make more informed retirement decisions. If you want to explore what your future pension could look like, use our Local Government Pension Scheme Calculator to model your potential benefits, then check important decisions against your latest LGPS statement or information from your pension fund.

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