From 1 April 2015, each year you are in the Scheme 1/49th of your pensionable pay is added to your pension account PLUS a revaluation amount so that your pension keeps up with the cost of living.
The Department for Communities is consulting on moving the revaluation date to 6 April instead of 1 April. The following examples will be updated once this change is confirmed.
Alice earns £10,000 per year and will build up pension savings in that year of: 1/49 x £10,000 = £204.08
Table 1 below shows how her pension will build up over five years, assuming that the annual revaluation is 2% and her pensionable pay stays at £10,000.
|Year||Opening Balance||Revaluation of 2%||New Pension Savings||Closing Balance|
|Year 1||£0||+ £0||+ £204.08||= £204.08|
|Year 2||£204.08||+ £4.08||+ £204.08||= £412.24|
|Year 3||£412.24||+ £8.24||+ £204.08||= £624.56|
|Year 4||£624.56||+ £12.49||+ £204.08||= £841.13|
|Year 5||£841.13||+ £16.82||+ £204.08||= £1,062.03|
You can exchange part of your annual pension for a one off tax-free cash payment. You can take up to 25% of the overall capital value of your pension benefits as a lump sum and you will receive £12 lump sum for each £1 of pension given up, providing the total lump sum does not exceed £268,275 (2023/24 figure) less the value of any other pension rights you have in payment.
The overall capital value of your pension benefits is calculated as:
(Pension x 20) + lump sum + value of AVC fund (if any)
However, it should be noted that this calculation is not as simple as it appears as it is the benefits after pension has been exchanged for lump sum which must be taken into account, i.e. the calculation must be repeated for the new lump sum and new reduced pension to ensure that the 25% limit is not exceeded. As the capital value of accrued rights and pension to lump sum conversion are interdependent, multiple calculations may be required.
In the current climate of long life expectancies and low-interest rates, members are reminded that the cash sum may not be sufficient to replace the pension surrendered. If you are considering this option, you are strongly recommended to contact an Independent Financial Advisor for advice.
On 6 April each year the CARE pension that you have built up to the 31 March the previous year is revalued in line with Orders made by the Department of Finance. This ensures that your pension keeps up with the cost of living. The benefits built up in the Scheme are revalued based on the year to year change in the Consumer Prices Index figure to the previous September. The cost of living adjustment can go down as well as up.
The revaluation rates for 2021, 2022 and 2023 are shown below:
|Effective Date||CARE Revaluation|
|6 April 2023||10.1%|
|1 April 2022||3.1%|
|1 April 2021||0.5%|
Any pension that you have built up until 31 March 2015 was added to your pension account when the new Scheme came into force on 1 April 2015. This amount will then become the opening balance of your pension account for the 2015/16 year (Year 1).
The pension you have built up before 1 April 2015 is calculated as:
Annual pension = Membership to 31 March 2015 x career average pay to 31 March 2015 / 60
Career Average Pay is the sum of each year’s pensionable pay, ending on a 31 March, uprated in line with the Consumer Price Index (CPI) and divided by the total membership in the Scheme.
Basic Allowance and Special Responsibility Allowance are the only elements of your councillor’s pay that are classed as pensionable.
Mark has been a member of the Scheme since April 2010. He has 5 years’ membership under the 2009 Scheme and if he retires in April 2019 he will have 4 years’ membership under the 2015 Scheme. When Mark decides to retire in April 2019 he earns £10,000 per year, and his earnings have not changed since he joined the Scheme in 2010.
Membership from 2010 – 2015
Annual pension = 5 (years) x £10,000 / 60 = £833.33
£833.33 now becomes the opening balance under Year 1 of the 2015 Scheme.
Membership from 2015 – 2019
New pension savings per year – £10,000 / 49 = £204.08
|Year||Opening Balance||New Pension Savings||Total Pension Savings||Revaluation of 2%||Closing Balance|
|Year 1||£833.33||+ £204.08||= £1,037.41||+ £20.75||= £1,058.16|
|Year 2||£1,058.16||+ £204.08||= £1,262.24||+ £25.24||= £1,287.48|
|Year 3||£1,287.48||+ £204.08||= £1,491.56||+ £29.83||= £1,521.39|
|Year 4||£1,521.39||+ £204.08||= £1,725.47||+ £34.51||= £1,759.98|
Total Pension: £1,759.98 per Year
Mark will receive a total annual pension of £1,759.98 per year
If you pay Additional Voluntary Contributions (AVC’s) via the Scheme you may elect to take up to 100% of the accumulated fund in your AVC account as a tax-free lump sum if you draw it at the same time as your Scheme pension benefits, provided when added to the Scheme lump sum it does not exceed 25% of the overall value of your Scheme benefits (including your AVC fund).
The Scheme provides statutory pension increases. This means that if you retire on or after age 55, your pension will be increased each year in line with cost of living increases. Ill-health pensions are increased each year in line with inflation regardless of age, with the exception of some deferred members who have their pension brought into payment due to ill-health. These members will only receive pension increases before age 55 if an independent registered medical practitioner approved by NILGOSC certifies that the deferred member is permanently incapable of all work.