Although the normal retirement age for councillor members in the Local Government Pension Scheme (LGPS) is 65, you may not wish to perform the duties of your office until this age. You may decide to retire earlier and as a councillor member of the Local Government Pension Scheme, this option is available to you.

Sometimes it is a necessity rather than a choice to retire early because of deteriorating ill health and in these circumstances, your LGPS benefits can provide you with an immediate retirement pension, which could even be enhanced.

New pension tax simplification rules

From the 6th April 2006, HM Revenue and Customs introduced new simplified rules around how pensions are taxed. These rules introduced a lifetime allowance which is the total capital value of all your pension arrangements, but not your state pension, which you can build up without paying extra tax. Members with pensions payable from the 6th April 2006, are required to declare all occupational and personal pension entitlement (except state, survivor’s or dependant’s pensions) before their pension can be paid.

Retirement options available

The retirement options which may be available to you are summarised below:

When can I retire?
Can I retire early?
Will my pension and lump sum be reduced if I choose to retire early?
What happens if I have to retire early due to ill health?
What if I carry on working after age 65?

The retirement benefits available to you are summarised below:

What will my retirement benefits be?
How much will my pension be?
How much will my lump sum be?
Can I give up some of my pension to increase my lump sum?

When can I retire?

You can retire and receive your Local Government Pension Scheme (LGPS) benefits in full from age 65. The scheme also makes provisions for the early payment of your LGPS benefits.

Can I retire early?

If you have at least three months total membership you can, upon retirement from your office on or after age 60, elect in writing to your council to receive your LGPS benefits.  Between and including the ages of 50 and 59 you may also elect to receive your LGPS benefits, but only if your council gives their consent.

Will my pension and lump sum be reduced if I choose to retire early?

If you join the LGPS after 30 September 2006 and retire before age 65, your pension and lump sum will be reduced. The reduction is calculated in accordance with guidance issued by the Government Actuary. If you are contributing to the scheme on 30th September 2006 some or all of your benefits paid early could be protected from the reduction.

What happens if I have to retire early due to ill health?

If you have at least three months total membership or have brought a transfer value into the LGPS and an administering authority approved independent registered medical practitioner certifies that you have become permanently unable until your 65th birthday to perform the duties of your office efficiently because of ill health or infirmity of mind or body, you will receive your pension and lump sum immediately. The medical practitioner must be qualified in occupational health medicine and must not have previously been involved in your case.

What if I carry on working after age 65?

If you carry on in office after age 65 you will continue to pay into the scheme, accruing further benefits.  You can receive your pension when:

• you retire, or
• you reach the eve of your 75th birthday,

which ever occurs first.

If you draw your pension after age 65, the pension you accrued prior to age 65 will be increased to reflect the fact that it will be paid for a shorter time.

Your pension has to be paid before your 75th birthday.

What will my retirement benefits be?

When you retire, you will receive a pension and a tax free lump sum from the LGPS. At state pension age you will also receive the basic flat rate state pension if you have paid sufficient National Insurance contributions during your working life. For more details regarding your state pension can be found at The Pension Service website www.thepensionservice.gov.uk/, which is part of the Department for Work & Pensions.

How much will my pension be?

Your pension is based on your total membership and your career average pay.

How much will my lump sum be?

The lump sum automatically paid on retirement is three times your annual pension and is tax free. Like your pension, it is based on your career average pay and your total membership.

For further information on how your pension and lump sum will be calculated, please refer to A Guide to the Local Government Pension Scheme for Eligible Councillors in England and Wales which can be accessed from the scheme guides/leaflets page

Can I give up some of my pension to increase my lump sum?

If you draw your benefits on or after 6 April 2006, you will be able to exchange some of your pension to receive a larger tax-free lump sum.

You will be able to take up to a maximum of 25% of the capital value of your pension benefits as a tax free lump sum or, if lower, 25% of the lifetime allowance less an adjustment for the value of any other pension benefits you are already drawing. The lump sum automatically paid on retirement roughly equates to 15% of the capital value. Any amount you take as a lump sum above the automatic lump sum would be achieved by exchanging part of your annual pension for a one off tax-free cash payment – for each £1 annual pension given up you will receive £12 lump sum. You may not reduce your pension to below your Guaranteed Minimum Pension.

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