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How is my pension calculated?

Your pension formula explained

The annual pension that you build up is based on a set formula and not based on your or your employer's contribution amount or on the amount of investment returns.

How this works depends on the periods of time you spent in the scheme. Your pension may cover one or both of the periods described.

a) Pre 2014 service:

Final Salary benefits

For members who have previous LGPS pension up to 31 March 2014, that proportion of your pension is calculated based on a Final Salary scheme using the leaving salary for the job (or potentially a later job, if the jobs are aggregated together).

The rate of build up varies depending on whether the service is pre-2008 or between 2008 and 2014. For each year of membership between 1 April 2008 and 31 March 2014 you build up a pension of 1/60th of your final pay as a pension. For each year of membership before 1 April 2008, you build up a pension of 1/80th of your final pay plus an automatic lump sum of three times your pension. In both cases, a proportional adjustment is made for part-time working and when a full year is not worked.

Your final pay is usually your pensionable pay over the 12 months leading up to the date you leave the scheme. However, the equivalent pay from one of the previous two years is used if it is higher.

An example calculation can be found by clicking on the relevant tab below.

If you qualify for McCloud, and McCloud protection proves beneficial to you, you may be entitled to additional benefits based on final salary. You do not need to do anything to do this assessment - we will do this on your behalf and advise you of figures in your Annual Benefit Statements.

b) Post 2014 service:

Career Average Revalued Earnings (CARE) scheme benefits

The amount of annual pension that you build up, from 1 April 2014, is known as a Career Average Revalued Earnings (CARE) scheme. 

Your CARE pension is built up annually (1 April - 31 March) and calculates an annual pension using the formula:

Pension = Accrual Rate x Pensionable Pay

(The current Accrual Rate for the LGPS is 1/49th)

Let’s look at the final salary benefits built up by Scott, 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.

 

Annual pension for the period 1 April 2008 to 31 March 2014 :

6 / 60th x £28,000 = £2,800

Annual pension for the period 1 April 2001 to 31 March 2008:

7 / 80ths x £28,000 = £2,450

Plus a tax-free lump sum:

3 x 7/80ths x £28,000 = £7,350

Scott's total annual pension would be £5,250, plus a one-off payment of £7,350, which is the value of the pension built up in his pension account since 1 April 2014.

Let’s look at the final salary benefits built up by Scott, 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.

 

Annual pension for the period 1 April 2008 to 31 March 2014 :

6 / 60th x £28,000 = £2,800

Annual pension for the period 1 April 2001 to 31 March 2008:

7 / 80ths x £28,000 = £2,450

Plus a tax-free lump sum:

3 x 7/80ths x £28,000 = £7,350

Scott's total annual pension would be £5,250, plus a one-off payment of £7,350, which is the value of the pension built up in his pension account since 1 April 2014.

Martina earns £25,000 in a year. Her annual pension is calculated as follows:

£25,000 x 1/49 = £510.20 per annum

Inflation is added each scheme year (1 April - 31 March).

The table below uses example figures:

Start Date End Date Opening Balance Pensionable Pay Pension Accrued Closing Balance Inflation Total Annual Pension 
01/04/2024 15/02/2025

£1,034.22

 £25,000.00 £510.20 £1,544.42 3.1 £1,592.29
01/04/2023 31/03/2024 £518.87 £25,000.00 £510.20 £1,029.07 0.5 £1,034.22
01/04/2022 31/03/2023 £0.00 £25,000.00 £510.20 £510.20 1.70 £518.87

Martina's pension is paid to her each year from Normal Retirement Age (her State Pension Age) until her date of death.

Martina's annual pension is increased each year in line with Cost of Living (CPI) inflation.

Martina earns £25,000 in a year. Her annual pension is calculated as follows:

£25,000 x 1/49 = £510.20 per annum

Inflation is added each scheme year (1 April - 31 March).

The table below uses example figures:

Start Date End Date Opening Balance Pensionable Pay Pension Accrued Closing Balance Inflation Total Annual Pension 
01/04/2024 15/02/2025

£1,034.22

 £25,000.00 £510.20 £1,544.42 3.1 £1,592.29
01/04/2023 31/03/2024 £518.87 £25,000.00 £510.20 £1,029.07 0.5 £1,034.22
01/04/2022 31/03/2023 £0.00 £25,000.00 £510.20 £510.20 1.70 £518.87

Martina's pension is paid to her each year from Normal Retirement Age (her State Pension Age) until her date of death.

Martina's annual pension is increased each year in line with Cost of Living (CPI) inflation.

How to view your pension benefits

To see how your LGPS pension has been calculated, login to the Engage portal  and go to the 'Your Current Pension' section - there you will see a CARE pension table that shows how your annual pension has been building up each scheme year, including inflation.

For more information on the Engage pension portal and how it can help you to easily manage your pension, have a look at our dedicated Engage page, which includes a comprehensive FAQ section.