Thank you to everyone who joined our Pensions Awareness Sessions on 17 September. We were delighted to see so many members attending and engaging with the presentations.
We were unable to answer individual questions during the sessions due to the large number of participants and the amount of information we wanted to cover. However, as promised, we have reviewed all the questions you submitted through the Q&A function and have provided answers below.
To make it easier to find the information most relevant to you, we have grouped the questions into the following categories, with a series of quick links relating to the category:
- Retirement Age, Early Retirement and the 85-Year Rule
- Lump Sums, Tax-Free Cash and Commutation
- AVCs and APCs
- Death Benefits
- Flexible Retirement, Redundancy and Ill Health Retirement
- Deferred Pensions, Transfers and Combining Benefits
- Pension Increases, Calculators and Future Scheme Changes
If your question is not covered, or if you require information about your own pension benefits, please contact the Pension Services team through the contact us section of our website.
LGPS questions and answers
Retirement age, early retirement and the 85-year rule
Quick links
Questions and answers
What is the minimum age to access LGPS benefits?
You can currently choose to take your LGPS pension from age 55. The normal minimum pension age is due to rise from 55 to 57 in April 2028. If you take your pension before your Normal Pension Age, it is normally reduced because it is being paid for longer.
What retirement age is assumed for the 1/49th formula?
The 1/49th formula is used to build up pension each year in the CARE section of the LGPS. It does not assume that you retire at a particular age. Each year, 1/49th of your pensionable pay is added to your pension account. When you take your pension, reductions or increases may then apply depending on whether you take it before, at or after your Normal Pension Age.
What is Normal Pension Age?
For CARE benefits built up from 1 April 2014, your Normal Pension Age is linked to your State Pension age, with a minimum of age 65. For final salary benefits built up before April 2014, the normal pension age is usually 65, although some members may have protections that affect when benefits can be paid without reduction.
Can I retire before Normal Pension Age but delay taking my pension?
Yes. If you leave your job before Normal Pension Age and do not take your pension straight away, your benefits normally become deferred benefits. They remain in the LGPS and are increased each year in line with cost-of-living increases. You can then choose when to claim them, subject to scheme rules.
If I retire 18 months before Normal Pension Age, is the reduction pro-rated?
Yes, early retirement reductions are normally based on the exact period in days, between the date you take your pension and your Normal Pension Age. If you retire part-way between the published year bands, the reduction is calculated proportionately.
How does the 85-year rule work?
The 85-year rule is a protection that may apply to some members who were in the LGPS before 1 October 2006. Broadly, it looks at your age plus your LGPS membership, and if these add up to 85 or more, some or all of your benefits may be protected from early retirement reductions.
Does the 85-year rule still apply if I am over 60 and my age plus membership is 85 or more?
If you were a member of the LGPS between 1 April 1998 and 30 September 2006, and your age and membership add up to 85 or more you may have some level of protection from the 85-year rule. It does not usually apply to all benefits. Online calculators include the 85-year rule protections, if you qualify.
Does the old protection for taking benefits unreduced at 60 after 25 years’ membership still apply?
Some older protections may apply to benefits built up before scheme changes, but this depends on your individual membership history and dates. It is not a general rule for all members. Please contact the team for more information.
What is the increase if I take my pension after Normal Pension Age?
If you take your LGPS pension after Normal Pension Age, it is normally increased because it is being paid later. The exact increase is calculated using actuarial factors set for the scheme, so it is best shown in an individual retirement estimate.
Lump sums, tax-free cash and commutation
Questions and answers
Is the entire lump sum selected using the slider tax-free at full retirement?
Yes. The calculation is tailored to you and will show you the maximum which you can take as tax-free cash.
If I take the maximum cash lump sum and a lower pension, is all the cash tax-free?
Yes.
Can I take the lump sum earlier than the monthly pension?
No, your LGPS lump sum and annual pension are paid as part of the same retirement benefits package and must be taken at the same time. You cannot take the main scheme lump sum separately in advance of the pension.
If I continue working, will the lump sum count for income tax?
No, your tax-free lump sum is paid free of tax. However, pension income is taxable. Tax depends on your personal circumstances, so members should contact HMRC or seek regulated financial advice if they are unsure.
Why is the LGPS commutation rate £12 of lump sum for every £1 of annual pension given up?
The LGPS uses a set commutation rate under the scheme rules. This means that for every £1 of annual pension you give up, you receive £12 of lump sum. Other pension schemes may use different rates because their rules and funding arrangements are different.
Could the commutation rate be reviewed in future?
Scheme rules can change, but there is no guarantee that the commutation rate will change. Any change would be made at a national level, not by an individual fund.
AVCs, APCs and paying extra
Questions and answers
What is the difference between AVCs and APCs?
Additional Voluntary Contributions, or AVCs, build up a separate investment pot alongside your LGPS pension. The value depends on how much you pay in and how the investments perform. Additional Pension Contributions, or APCs, buy a set amount of extra LGPS pension. AVCs are more like an investment account; APCs add extra defined benefit pension.
Can you have both AVCs and APCs?
Yes. Members can usually pay both AVCs and APCs, subject to scheme rules, tax limits and affordability.
Which is more cost-effective: AVCs or APCs?
There is no single answer. APCs buy a known amount of extra pension, while AVCs depend on investment performance and the options available at retirement. AVCs may be attractive where a member hopes to take the pot as tax-free cash alongside the LGPS pension, but this depends on HMRC limits and the member’s overall benefits. APCs may be attractive when a member wants to buy a guaranteed amount of pension. Members should consider independent financial advice.
Can you explain AVCs further?
AVCs are extra contributions paid into a separate pension pot. For Oxfordshire Pension Fund members, AVCs are invested through the fund’s provider Legal and General. At retirement, the pot can usually be used in several ways, such as taking tax-free cash within limits, buying an annuity, or buying extra LGPS pension if the rules allow.
Do AVCs grow over time?
AVCs can grow over time because they are invested, but investment values can go down as well as up. The final value depends on contributions paid, investment returns, charges and market conditions.
Can I take my AVC pot separately or earlier than my LGPS pension?
In-house AVCs are linked to your LGPS benefits and must be taken when you take your main LGPS pension.
How does taking AVCs as tax-free cash affect the maximum lump sum from pension?
The AVC tax-free cash is included when checking the overall HMRC tax-free lump sum limit. If your AVC pot uses up some or all of the available tax-free allowance, it may reduce the amount of main scheme pension you can give up for extra lump sum.
What happens to an old AVC pot with Prudential?
Most AVC pots were moved from Prudential to Legal & General in 2023 / 2024. If you still have one of the older Prudential AVCs you may have different terms and options, so members should ask Prudential for details of their own policy.
What is the maximum I can pay into AVCs or APCs?
For AVCs, you can generally save up to 100% of your taxable pay, subject to HMRC limits. For APCs, the LGPS sets a maximum amount of extra annual pension that can be bought. The exact maximum changes over time, so members should check the current limit before applying.
Does the council have to pay additional amounts if I use the APC route?
No. Standard APCs are paid by the member. Employers can choose to offer Shared Cost APCs, but this depends on employer policy and is not automatic.
Can I continue paying the full-time amount if I reduce my hours?
No. If you reduce your hours, your LGPS contributions are based on your actual pensionable pay. You may be able to consider APCs or AVCs to increase your pension.
Why does it look like I pay more from salary than the pension added?
Your contributions are not paid into an individual pot in the same way as a savings account. The LGPS is a defined benefit scheme, so your pension is based on scheme rules rather than the exact contributions you personally pay. Your employer also contributes to the cost of providing the benefits. The pension added is an amount that will be paid to you annually until you die, not just once.
Death benefits, nominations and dependants
Questions and answers
If I die after retirement, will my pension continue to be paid to my spouse?
If you are married, in a civil partnership, or live with an eligible cohabitee, a survivor pension may be payable to your partner after your death. The amount depends on your membership and the scheme rules that apply to your benefits. It is not the full amount of your pension.
If I die after retirement and I am under 75, is a death grant still paid?
A death grant may be payable if you die as a pensioner and the pension paid to you is less than the death grant payable under the scheme rules. Recent changes have also affected the age 75 restriction, so please contact us to confirm the current position for your circumstances.
If I die after receiving my pension and I am single, can adult children aged 24 or over receive anything?
Children’s pensions are normally only payable to eligible children, for example younger children or children in qualifying education or training. Adult children aged 23 and over would not qualify for a children’s pension. A death grant, if payable, may be paid at the fund’s discretion, taking account of any nomination.
Do I need to make a nomination if I am married?
It is still good practice to keep an expression of wish or nomination up to date. A spouse or civil partner may have an automatic right to a survivor pension, but death grants are normally paid at the fund’s discretion. A nomination helps the fund understand your wishes.
Is the three-times death grant based on annual or monthly salary?
The death in service death grant calculation is based on actual (pro-rated) annual pay.
Flexible retirement, redundancy and ill health
Questions and answers
How does flexible retirement work?
Flexible retirement lets you reduce your hours or move to a lower-grade post and, with your employer’s agreement, take some or all of the LGPS benefits you have built up. It is not automatic. You must apply via your employer, and your employer must agree under their policy.
What happens to benefits not brought into payment under flexible retirement?
Flexible retirement lets you reduce your hours or move to a lower-grade post and, with your employer’s agreement, take some or all of the LGPS benefits you have built up. Usually, members bring the pension benefits related to the job they are flexibly retiring from. If you have any other LGPS pensions or other pensions, these can be brought into payment at different times.
A new pension account will be opened for you from the day after your flexible retirement so that you can continue paying into the LGPS to build up further pension in your ongoing employment, if you wish.
If I am struggling health-wise and want to reduce my hours, can I use my pension to subsidise this?
Flexible retirement may be an option if your employer agrees to a permanent reduction in hours or grade and agrees that you can take some or all of your pension. If you cannot continue working due to ill health, ill health retirement may also need to be considered, but this has a separate medical and employer process.
If I am made redundant at age 60, do I automatically get my pension?
If you are an active LGPS member aged 55 or over, with at least two years’ membership, and you are dismissed due to redundancy or business efficiency, your pension from that employment is normally paid immediately and unreduced for early payment. It is not usually enhanced to Normal Pension Age.
If I am made redundant, do I get the pension built up or the predicted amount at Normal Pension Age?
You would receive the pension you already have built up to your leaving date, but without reduction for early payment. It is not enhanced up to the amount you might have built up by Normal Pension Age.
Is taking different LGPS pensions at different times affected by redundancy?
Redundancy retirement applies only to the pension linked to the employment from which you are being made redundant. Other deferred LGPS benefits will not be automatically payable
Deferred pensions, transfers and combining benefits
Questions and answers
If I leave Oxfordshire, do I need to take action to leave my pension in place?
If you have at least two years’ qualifying membership, your pension will usually become deferred automatically when you leave and are not taking it straight away. You should keep in touch with us via our online portal, My Oxfordshire Pension, and keep your contact details up to date.
Can I leave my pension for a few years before taking it?
Yes. If you leave before taking your pension, your deferred benefits can remain in the LGPS and receive annual cost-of-living increases. Whether it is better to take them earlier or later depends on your personal circumstances.
Are cost-of-living increases applied to deferred pensions?
Yes. Deferred pensions are normally increased each year in line with CPI, so they keep pace with inflation.
Is the amount added for a deferred pension the same as for an active pension?
Both are increased in line with CPI.
If I have deferred benefits with another LGPS fund, can I take them at a different time?
Yes. Deferred LGPS benefits from a different employment or fund, which have not been combined, can be paid at a different time.
Do all LGPS pensions have to be taken at the same time?
No, not always. It depends whether the records have been combined and what type of benefits they are. Separate deferred pensions may sometimes be taken at different times.
Can I or should I combine two LGPS pensions?
When you have LGPS benefits in more than one fund, you may have the option to combine them. Whether this is beneficial depends on your pay, service history, protections and retirement plans. Please make sure you read and understand all the information sent to you by the team and ask any questions you might have before deciding. The team cannot give you any advice but will be happy to answer questions.
How long does it take to combine an LGPS pension from another authority?
Timescales vary because both funds need to exchange information and calculate the transfer. Members should allow several months and should keep an eye out for correspondence and respond promptly to any letters or forms.
What happens to funds transferred in from another pension scheme?
If a transfer is accepted into the LGPS, it is converted into LGPS pension using scheme factors. The amount of pension credited depends on the transfer value, your age and the scheme rules at the time.
If I leave and later transfer my LGPS pension to a new employer’s scheme, is there a time limit?
Transfer rules and time limits depend on the receiving scheme and whether the transfer is between public sector schemes or to another type of arrangement. Members should request transfer information as early as possible after joining a new scheme.
If I roll my pre-2014 pension into my current pension, what happens?
If older LGPS benefits are combined with current benefits, this can affect how they are linked to pay, protections and retirement options. The fund should provide details before you decide, as it may not be reversible.
Pension increases, calculators and scheme changes
Quick links
Questions and answers
When does the annual pension increase happen?
LGPS pensions in payment and deferred pensions are increased each April, in line with the annual public service pensions increase order.
Why can’t I see my current contributions in my account?
Your pension contributions are not shown on My Oxfordshire Pension because the LGPS is a Defined Benefit (DB) scheme. In a Defined Benefit scheme, your pension is based on a formula using your pay and membership, rather than the value of contributions paid into an individual pension pot. As a result, the key information is the pension benefits you have built up, not the contributions that have been paid.
Why does the calculator not allow me to enter a retirement date after State Pension age?
We are awaiting clarification from our software provider. Watch this space.
What is the likelihood of the LGPS formula changing in future?
The LGPS is set by national regulations, so future governments could make changes. However, any changes would normally be consulted on and communicated nationally. When the scheme has changed in the past, benefits you have already built up have usually always been protected under the rules in force at the time they were earned.
If local government reorganisation goes ahead, what happens to the pension service at Oxfordshire?
Members’ LGPS benefits are set out in law and would not disappear because of organisational change. Further information would be provided if proposals affect the pension service. It is likely there would be some changes to administration arrangements, but these should not affect members.
What happens if somebody leaves the UK before retirement age?
LGPS benefits can usually remain deferred until they are due. Members living overseas should keep their contact, bank and tax details up to date. Payments into overseas bank accounts are usually possible, but tax and banking arrangements can vary.