Paying into the Local Government Pension Scheme (LGPS) can be one of the best ways to safeguard your future. The LGPS is amongst the largest pension schemes in the UK and offers many unique benefits.
Whether you are already paying in, or are a prospective member considering joining us, this article aims to break down the buzzwords and delve into exactly what the LGPS is and what it can offer you.
When you think about your future finances, you should give careful thought to the question “Are council pensions good?” If you work for the government or are thinking about changing careers, learning about the Local Government Pension Scheme (LGPS) could have a big effect on how you plan to retire.
As someone who’s spent years researching pension schemes I can tell you that council pensions have some unique advantages that many private sector alternatives simply can’t match. But like everything in life, they aren’t perfect for everyone.
I’ll tell you everything you need to know about council pensions in this in-depth guide, including their pros and cons and why they might be a great way to secure your financial future.
What Exactly Are Council Pensions?
Council pensions formally known as the Local Government Pension Scheme (LGPS) are defined benefit pension schemes available to employees working in local government. The LGPS is one of the largest pension schemes in the UK, with nearly 2 million active members and around 1.75 million pensions currently in payment.
The scheme is made up of 90 funds in England and Wales that are administered and managed at the local level, although the scheme rules are set nationally. This ensures consistency across different councils while allowing for local administration.
The Security Factor: Why Council Pensions Stand Out
One strong reason why council pensions are often seen as good is that they offer security. The LGPS is a defined benefit scheme, which means that your pension does not depend on how well your investments do like in most defined contribution schemes. This means that your retirement income is guaranteed based on a formula set out in the rules.
The Greater Manchester Pension Fund (GMPF) said, “When it looks like the economy, inflation, and investment returns are going down, you should see what happens to your savings and money.” If you’re a member of the Local Government Pension Scheme (LGPS), you can rest easy knowing that these changes won’t affect your pension. “.
This provides an invaluable peace of mind in an increasingly uncertain world. Your retirement income won’t fluctuate with market conditions – it’s predictable and secure.
How the LGPS Works: Building Your Pension
The LGPS underwent significant changes in April 2014, transitioning from a final salary scheme to a career average scheme. If you joined before this date, you’ll have benefits built up under both systems.
Current Scheme (2014 onwards)
Under the current scheme, each year 1/49th of your pensionable pay is added to your pension account. At the end of the year, it’s adjusted to account for cost of living changes.
For example:
- Year 1: With a £30,000 salary and 1.5% cost of living adjustment: £30,000/49 = £612.24 × 1.5% = £621.42
- Year 2: With a £30,300 salary and 2% cost of living adjustment: £30,300/49 = £618.37 + (£621.42 × 2%) = £1,264.59
Pre-2014 Scheme
If you were a member before April 2014, your benefits for that period are calculated differently:
- Between 2008 and 2014: 1/60th of your final pay for each year of membership
- Before 2008: 1/80th of your final pay plus an automatic tax-free lump sum of three times your pension
Contributions: What You’ll Pay In
Your contribution rate to the LGPS is based on your salary, with rates for 2025-26 ranging from 5.5% to over 10.5% depending on your pay band. Here’s the current breakdown:
| Your actual pensionable pay | Your contribution rate |
|---|---|
| Up to £17,800 | 5.5% |
| £17,801 to £28,000 | 5.8% |
| £28,801 to £45,600 | 6.5% |
| £45,601 to £57,700 | 6.8% |
| £57,701 to £81,000 | 8.5% |
| £81,001 to £114,800 | 9.9% |
| £114,801 to £135,300 | 10.5% |
What’s crucial to remember is that your employer also contributes significantly to the scheme to help meet the guarantee of your future benefits. This shared responsibility approach means you’re not shouldering the entire burden of funding your retirement.
Beyond the Basics: Additional Benefits of Council Pensions
Council pensions offer several benefits that go beyond just a retirement income:
1. Life Cover and Family Protection
If you die while still a member of the scheme, a lump sum death grant of three times your assumed pensionable pay will be paid to your beneficiaries (provided you’re under 75). Additionally, a survivor’s pension will be paid to your spouse, civil partner, or eligible cohabiting partner for the rest of their life.
2. Ill-Health Protection
Should you become unable to work due to illness or injury, the LGPS provides ill-health retirement benefits. These can provide an immediate income if you meet the criteria, offering a valuable safety net.
3. Early Retirement Options
Many council pension schemes allow you to retire earlier than the state pension age. While this will reduce your pension amount (unless you’re retiring due to ill health), it gives you more flexibility in planning your later years.
4. Flexible Retirement
The LGPS also offers the possibility of taking a portion of your pension while continuing to work with reduced hours or in a less senior position. This phased approach to retirement can help ease the transition from work to retirement.
When Can You Access Your Council Pension?
The Normal Pension Age (NPA) for benefits built up since April 2014 is linked to your state pension age. For benefits built up before April 2014, the NPA is 65.
However, you don’t have to wait until your NPA to access your pension. You can:
- Take your pension any time between ages 55 and 75
- Take it earlier than your NPA (with a reduced amount)
- Delay it beyond your NPA (with an increased amount)
This flexibility allows you to tailor your retirement plans to your personal circumstances.
The Downsides: What to Consider
While council pensions offer many advantages, they aren’t without potential drawbacks:
1. Limited Flexibility
Defined benefit schemes like the LGPS typically offer less flexibility compared to defined contribution schemes, where you have more control over your investments and how you access your money.
2. Higher Contributions
Council pensions often require higher contributions from employees compared to some defined contribution schemes. This means less take-home pay during your working years.
3. Potential for Changes
Like all pension schemes, the LGPS is subject to potential future changes in benefits or contributions. While past rights are typically protected, future benefits could be altered.
4. Career Mobility Considerations
If you’re planning to move between public and private sectors frequently, you’ll need to carefully consider how this might impact your pension arrangements.
Council Pensions vs. Private Sector Alternatives
When comparing council pensions to private sector alternatives, several key differences emerge:
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Security: Council pensions offer a guaranteed income, while most private sector schemes are defined contribution with no guarantees.
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Employer Contributions: Public sector employers typically contribute more generously than many private sector employers.
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Inflation Protection: The LGPS includes built-in protection against inflation, which many private schemes don’t offer.
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Investment Risk: With council pensions, the employer bears the investment risk; in private schemes, this risk typically falls on the employee.
Real Questions People Ask
Q: Are council pensions guaranteed?
A: Yes, council pensions are typically defined benefit schemes, which means your retirement income is guaranteed based on your salary and length of service. This provides security that defined contribution schemes can’t match.
Q: Are council pensions still a good option in 2025?
A: For many individuals, council pensions remain an excellent option, especially if you value security and predictability in your retirement income. However, the best choice depends on your personal circumstances, career plans, and attitude toward risk.
Q: What happens to my council pension if I leave local government?
A: If you leave before retirement age, your pension becomes “deferred” and will be paid when you reach retirement age. The amount will be adjusted for inflation between leaving and retirement. Alternatively, you may be able to transfer your benefits to another pension scheme.
Q: Can I opt out of a council pension?
A: Yes, you can opt out, but it’s generally not advisable given the valuable benefits you’d be giving up. If you’re considering opting out, seek independent financial advice first.
Navigating Your Council Pension: Practical Tips
If you’re a member of the LGPS or considering joining, here are some practical steps to make the most of your pension:
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Regularly check your annual benefit statement to understand what you’re on track to receive.
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Consider additional voluntary contributions (AVCs) if you want to boost your retirement income.
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Keep your nominated beneficiaries up to date to ensure death benefits go to the right people.
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Explore the pension calculator tools provided by your pension fund to model different retirement scenarios.
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Attend pre-retirement workshops offered by your employer to fully understand your options.
In my view, council pensions offer exceptional value for most people, with their combination of security, guaranteed benefits, and additional protections. They provide a solid foundation for retirement planning that few other pension arrangements can match.
That said, the best pension option for you depends on your individual circumstances, career plans, and financial goals. If you highly value security and are planning a long-term career in local government, the LGPS is likely to serve you very well.
For those moving between sectors or seeking more investment control, a combination of pension arrangements might be optimal. But even in these cases, the council pension benefits you accrue could form a valuable part of your overall retirement strategy.
Whatever your situation, understanding the features and benefits of council pensions is an important step toward making informed decisions about your financial future. And remember, it’s never too early to start planning for retirement!
Have you had experience with council pensions or are you considering joining the scheme? I’d love to hear your thoughts in the comments below.
How do I join?
You can join the LGPS if:
- You work for a city or company that offers pension plans to its employees, and
- You are under age 75, and
- It’s not possible for you to join another public service pension plan, like one for teachers, police, or firefighters.
When most people join the pension plan, they are automatically put into the LGPS. This is called “auto enrolment.” Those who are automatically enrolled:
- have a job contract that lasts at least three months, and
- earn at least £10,000 per year, and
- are under age 75.
As soon as you join the NESPF, pension contributions will be taken out of your pay. This will show up on your pay stub. You will also receive written notification of your membership from your employer and the Fund.
How much do I pay?
How much you pay, is based on how much you earn. When you join the scheme and every April afterwards, your employer will compare your pay to the LGPS contribution rates set by the government. These rates are reviewed each year to keep up with any changes in the cost of living. If at any time your contribution rate changes, your employer will let you know.
You can use our Costs and Contributions Calculator to see your contribution rate.
LGPS Pensions Board – 21 July 2021
FAQ
Is a local government pension scheme good?
One of the best ways to protect your future is to put money into the Local Government Pension Scheme (LGPS). The LGPS is amongst the largest pension schemes in the UK and offers many unique benefits.
Is $5000 a month a good pension?
To retire comfortably, many retirees need between $60,000 and $100,000 annually, or $5,000 to $8,300 per month. This varies based on personal financial needs and expenses.
Is a government pension better than a 401k?
Both plans have their good and bad points, but pensions are usually thought to be better than 401(k)s because they guarantee a steady income for life. A person can be more aggressive with their 401(k), which could lead to more growth than is likely with a pension fund. Then again, investment losses are also possible.
Is a council pension a private pension?
Local Government Pension Scheme: an introduction
The LGPS is a statutory public service scheme, so the scheme’s benefits and terms are set out in regulations passed through parliament.
Is local government a good pension scheme?
So clearly Local Government had good pension schemes in the past. It’s an extremely good scheme. The size of the employers’ contribution just demonstrates how much it actually costs to run the scheme, and remember that contributions are tax free (so come out of salaries before tax). Just to clarify: there are two parts to the pension scheme:
Is 2025 a good time for the local government pension scheme?
In the long history of the Local Government Pension Scheme, 2025 may be seen as the decisive moment when power shifted away from councillors and council pension funds for good. Although often cited as one of the world’s largest pension schemes, its £400bn is split between 87 separate pension funds.
Should Council pension funds be pooled?
Council pension funds were once the big beasts of the LGPS investment world, but after a decade of pooling their role has gradually diminished. Now, the government’s proposals would restrict their investment decisions to the broadest of strategic questions, with the pools responsible for all implementation.
What is the local government pension scheme (LGPS)?
If you work in local government you’ll have access to the Local Government Pension Scheme (LGPS), one of the largest pension schemes in the UK. The amount you’ll get when you retire will depend on your earnings and how long you have been part of the scheme.
When can I access my Local Government Pension?
When you can access your local government pension will depend on when you left the scheme. Pension benefits are normally payable in full at your Normal Pension Age (NPA). Since 1 April 2014, the Normal Pension Age has been linked to your state pension age. For benefits built up before 1 April 2014, the Normal Pension Age is 65.
What happens if a pension scheme collapses?
It is guaranteed in the sense that it is Government backed so even if the scheme collapsed the Government would cover 90-100% of it depending on whether you were claiming already or not. If your investments underperform that’s just on you.