Pay less into your pension
If you’re experiencing financial hardship or you have other financial priorities, you may be tempted to opt out of paying into your pension. However, if you leave the scheme you could miss out on:
- a guaranteed income at retirement
- ill-health cover if you are too sick work (after two year’s membership)
- a death in service grant payable to your loved ones if you were to pass away
- tax relief on contributions
Rather than opting out, you could consider reducing your how much you pay in pension contributions.
As a member of the LGPS, the contributions deducted from your pay are based on your earnings and are set by your employer according to the contribution table
When you first join the LGPS, you will be enrolled in the main section of the scheme. However, you could choose to move to the 50/50 section, which allows you to remain in the LGPS, while reducing how much you pay.
To move to the 50/50 section, complete the contribution flexibility form PDF, 622 KB and send it to your employer.
How the 50/50 section works
In the main section, you pay full contributions in exchange for full pension build up. In the 50/50 section, you pay half the contributions you would in the main section, in exchange for half the pension build up.
By staying in the LGPS, you will still receive key scheme benefits such as full death in service cover, ill-health cover (after two years membership) and tax relief on any contributions you pay.
The amount you pay in the 50/50 section is determined by your pensionable pay and set out in the table below.
50/50 Contribution bands 2023 to 2024
| Pensionable Pay | 50/50 section contribution rate |
|---|---|
| Up to £17,600 | 2.75% |
| £17,601 to £27,600 | 2.90% |
| £27,601 to £44,900 | 3.25% |
| £44,901 to £56,800 | 3.40% |
| £56,801 to £79,700 | 4.25% |
| £79,701 to £112,900 | 4.95% |
| £112,901 to £133,100 | 5.25% |
| £133,101 to £199,700 | 5.70% |
| £199,701 and over | 6.25% |
How pension is worked out in the 50/50 section
In the main section, your pension for one tax year will be calculated as 1/49th of your pensionable pay.
For example, if your pensionable pay for one year is £28,000, the annual pension added to your account for that will be calculated as:
1/49 x £28,000 = £571.43 (annual pension)
In the 50/50 section, it is the same, except your pension will be calculated as 1/98th of your pensionable pay instead of 1/49th, thereby crediting you with half the pension you would have built up in the main section.
For example, if your pensionable pay for one year is £28,000 in the 50/50 section, the pension added to your account will be:
1/98 x £28,000 = £285.71 annual pension
If you were in the 50/50 section for part of the year, and in the main section for the other part, we will calculate each portion of pension respectively and add them together to create the yearly pension build up.
For example, if you were in the main section for 9 months and the pensionable pay you received for that period was £21,000 we would calculate this as:
1/49 x £21,000 = £428.57
If you were then in the 50/50 section for 3 months and the pensionable pay you received for that period was £7,000, we would calculate this as:
1/98 x £7,000 = £71.43
Then we would add them together to get the annual pension added to the account for the year:
£428.57 + £71.43 = £500 (annual pension)
For more information, see How your pension builds up
Buying back lost pension in the 50/50 section
If you have time away from work and your pension contributions reduce, depending on the reason you were away, you may lose out on pension built up for that period.
You can choose to buy back this ‘lost pension’ when you return to work by contributing to a lost pension Additional Pension Contribution (APC).
You will still be able to buy back any lost pension if you move to the 50/50 section. When you apply for the lost pension APC, you will be able to select which section of the scheme you are in. You will buy back 50/50 pension at the 50/50 rate.
If you are already paying towards a lost pension APC when you move to the 50/50 section, contributions will continue to be deducted. Unless you request that they stop, they will remain payable at the full rate.
Paying extra while in the 50/50 section
If you move to the 50/50 section, you won’t be able to pay towards an extra pension APC. If you move to the 50/50 section any pre-existing extra pension APC contracts will stop and you will be credited with the amount of extra pension you have built up until that date.
You can continue to save extra for your retirement whilst in the 50/50 section by paying towards Additional Voluntary Contributions (AVCs). If you are already paying towards an AVC Fund, the payments will continue unless you request that they stop.
Any pre-existing contracts for additional pension such as added years, part-time buy backs, Additional Regular Contributions (ARCs) or Additional Survivor Benefit Contributions (ASBC) will continue when you move to the 50/50 section.
Moving back to the main section
There are three circumstances where you will be moved back to the main section of the scheme:
1. You decide to move back to the main section
In the 50/50 section you won’t be building up as much pension as you would be in the main section. You can choose to move back to the main section at any time. All you need to do is complete a contribution flexibility form PDF, 622 KB and select the relevant option.
2. Your employer brings you back into the scheme
The 50/50 section is designed to be short-term, as such your employer is required to automatically move you back to the main section of the scheme approximately every three years. You can choose to remain in the 50/50 section at this point by completing a fresh contribution flexibility form and sending it to your employer.
3. You go to nil pay during a period of sickness or relevant child-related leave
In most cases, you will automatically be moved back to the main section if you are away from work due to sickness or injury, or relevant child-related leave and you go to nil pay by the next available pay period.
If you want to go back to the 50/50 section when you return to work, you can complete a fresh contribution flexibility form.
Making a decision
We always recommend that you get independent financial advice before making any decision about your pension. For more information, see Get help with decisions about your pension