Calculating your pension

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 the cost of living.

Increases are only paid to people who are younger than age 55 if the person:

•  is receiving a pension as a widow, widower, civil partner, eligible cohabiting partner or eligible child; or
•  is retired on ill-health grounds; or
•  has had their deferred benefits brought into payment on ill-health grounds and is considered permanently unfit for any regular full-time work.

If you retire before age 55 and are not entitled to increases, you are normally paid at a flat rate until age 55.  Once you reach this age your pension will be increased to the level it would have been, had it been increased every year by the rise in the cost of living since your date of leaving. However, no arrears are payable.

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.

Membership after 31 March 2015

Each year, if you are in the main section of the Scheme 1/49th of your pensionable pay is added to your pension account (1/98th if you are in the 50/50 section) PLUS a revaluation amount so that your pension keeps up with the cost of living. 

Pensionable pay includes your:

• basic pay
• overtime (contractual and non-contractual)
• additional hours
• shift allowance
• bonus
• acting up allowance, and
• any other taxable benefit specified in your contract as being pensionable. 

It does not include:

• travelling or subsistence allowance
• pay in lieu of holidays
• any sum which has not had income tax liability determined on it
• payment as an inducement not to terminate employment
• payment in lieu of notice to terminate a contract of employment
• payment in consideration of loss of future pensionable payments or benefits
• compensation for the purposes of achieving equal pay in relation to other employees
• payment in consideration of loss of future pensionable payments or benefits
• any amount treated as the money value for the provision of a motor vehicle
• any pay paid by your employer if you go on reserve forces service leave, and
• any non-consolidated non-pensionable payment paid to a member as part of an annual pay award.

Protected final pay and benefits for membership before 1 April 2015

Your retirement benefits will normally be calculated on your final pensionable pay (2009 definition i.e. excluding non-contractual overtime and additional hours) at retirement (if you are part-time, your final pay is increased to what you would have received had you been full-time). However, your benefits can be calculated on one of the two previous years’ pay if better and, if you downgrade in your last ten years with your employer, you have the option to notify NILGOSC in writing, at least one month prior to your date of leaving, that you wish to have your benefits based on the average of any three consecutive years in the last ten years (ending on a 31 March).

If you pay additional voluntary contributions (AVCs) via the Scheme you may elect at retirement to take up to 100% of the accumulated fund in your AVC account as a tax-free lump sum provided that when added to the Scheme lump sum it does not exceed 25% of the overall value of your Scheme benefits (including your AVC fund).  To avail of this tax-free benefit you must draw your AVC at the same time as your Scheme benefits.

If you do not take your AVC fund at the same time as your Scheme benefits you will be restricted to tax free cash of 25% of your AVC fund value.

Alternatively, if you are aged 55 or over, you could choose to transfer your AVC to a defined contribution (DC) scheme that offers flexible options.

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).

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.

Example

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

Total Pension: £1,759.98 per Year

Mark will receive a total annual pension of £1,759.98 per year

On 6 April each year the CARE pension that you have built up to the 31st March that 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.

From 1 April 2023 the date of revaluation changed from 1 April to 6 April to align with the tax year.

The revaluation rates for 2021, 2022, 2023 and 2024 are shown below:

Box 1 – ‘Your Details’
To help you understand the different terms used in the Calculator, hover over the text to see more information.

‘Pensionable Pay’
Drag the slider to choose the pay figure you wish to use. This will be the actual amount you would expect to earn in a Scheme year, including pay for all overtime and excess hours worked.

‘Inflation’
Drag the slider to choose an inflation figure (between 0% and 5%). This is an assumed figure only. The figure that will be used to work out your benefits in the future will depend on the Consumer Prices Index (CPI) measure of inflation each year.

The current rate of CPI used to increase pensions in payment is 10.1%. 

‘Pay Increase’
Drag the slider to choose an assumed pay increase in the future (between 0% and 5%). This is to help illustrate how possible future pay increases might impact on your pension in the Scheme.

‘Years in LGPS (NI)’

Select the number of years you expect to be in the new Scheme from 1 April 2015 (minimum is 2 years as this is the period of time you need to build up a pension in the new Scheme, the maximum you can input is 50 years – however there is no limit to the number of years you could have in the Scheme except that you must claim your benefits before your 75th birthday).

‘Show 50/50’
Select ‘Yes’ if you wish to see the impact of being in the 50/50 section for the number of years you selected in ‘Years in LGPS(NI)’.

Please note that the 50/50 section is designed to be a short-term option for when times are tough financially. Because of this, your employer is required to re-enrol you back into the main section of the Scheme every three years. This will be carried out in line with your employer’s automatic re-enrolment date. 

If the value of your pension from the Local Government Pension Scheme (NI) is within the HMRC limits you may, when it is due for payment, be able to have it paid as a one-off taxable lump sum instead of a monthly pension. This is known as Trivial Commutation.

In March 2014 the HMRC limits increased, meaning that if the capital value of all pensions that you have (not just those with the LGPS (NI)) is less than £30,000, you may be able to receive them as a one-off lump sum.

NILGOSC will need information on all pensions that you have to check if your benefits are within the HMRC limits. This excludes a spouse’s pension, state pension and state pension credit. 

It should be noted that;

•  a pension can only be commuted after the age of 55 (or 65 for male members and 60 for female members who have a GMP payable).
•  the commuted pension can only be paid when your lifetime allowance is available and your total crystallised amount, from all pensions, does not exceed £30,000.  
•  the commutation payment extinguishes all member’s rights to benefits e.g. no dependants’ benefits would be payable in the event of your death.

Members whose capital value of pension rights in the Local Government Pension Scheme (NI) is less than £10,000 may also trivially commute their pension rights.

If you would like to find out if you are eligible to commute your pension benefits, please advise the Pensions Administration Team when you are claiming payment of your benefits.

You can exchange part of your annual pension for a one-off tax-free cash lump sum. You can take up to 25% of the overall capital value of your pension benefits as a lump sum and you will receive £12 of lump sum for each £1 of pension you give up.  The overall capital value of your pension benefits is calculated as:

Capital value of pension benefits = (Pension x 20) + lump sum + value of AVC fund (if any)

The total lump sum cannot exceed £268,275 (2022/23) less the value of any other pension rights you have in payment. Details of the maximum tax-free lump sum that you can take will be provided to you shortly before retirement and you can then choose how much lump sum you wish to take.

Example

Mary has an annual pension of £6,706.92 and a lump sum of £7,425.  If she decides to give up £1,000 annual pension for an additional cash lump sum, then the reduced annual pension is:

£6,706.92 less £1,000 = £5,706.92 

And she will get an additional tax-free lump sum of:

£1,000 x 12 = £12,000 

Her total tax-free lump sum will now be – 

£12,000 + £7,425 = £19,425 

In the current climate of long life expectancies and low interest rates, members are reminded that the cash lump sum may not be enough to replace the pension given up. If you are considering this option, you are strongly recommended to contact an Independent Financial Adviser for advice.

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.

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.