Local Government Pension Scheme (LGPS) for Workers Moving Abroad

The Local Government Pension Scheme (LGPS) is one of the largest funded occupational pension schemes in the world, with more than 6 million members across England and Wales, separate equivalent schemes in Scotland and Northern Ireland. It covers not only council employees but a wide range of public-facing organisations: schools, further education colleges, universities, housing associations, and a range of charities and organisations admitted into the scheme by local government bodies.

For professionals who have built careers in these sectors before moving abroad — teachers working internationally, charity sector professionals relocating for development work, or former council employees taking roles in global organisations — the LGPS deferred pension can represent a very significant long-term asset. Understanding how it works, what happens during deferment, and what decisions arise at retirement is essential planning knowledge.

LGPS Structure: Career Average from April 2014

The LGPS is a defined benefit scheme structured as career average revalued earnings (CARE) for service from 1 April 2014 onwards. For service before that date, the scheme used a final salary structure (1/80th accrual with automatic lump sum of three times pension, or 1/60th without automatic lump sum for employees who transferred to the revised scheme from 2008).

Current accrual: For each year of membership from April 2014, the LGPS credits an amount equal to 1/49th of your pensionable pay in that year to your pension account. This amount is then revalued each year until you take benefits.

Revaluation during active service: Active members' accrued pension is revalued each April by CPI. In high-inflation years, this revaluation can be substantial in nominal terms.

Normal pension age: The LGPS normal pension age is linked to your state pension age (currently 66, rising to 67 between April 2026 and March 2028, and to 68 thereafter). This changed from age 65 (the previous NPA) as part of the 2014 reform.

Pre-2014 final salary benefits: Service before 1 April 2014 is preserved under the old final salary rules for existing members. For a long-serving employee who joined in 1995 and left in 2020, the pre-2014 service generates a pension based on final pensionable pay at the date of leaving (not retirement), revalued thereafter in deferment.

The McCloud Remedy and LGPS

The McCloud case affected the LGPS as well as other public service schemes. Members in active service on 31 March 2012 who were moved to the 2014 CARE scheme on 1 April 2014 may be entitled to choose which scheme's benefits apply to the "remedy period" of 1 April 2015 to 31 March 2022.

Affected members are contacted by their administering authority (the council or pension fund that manages their particular LGPS fund) to make their McCloud election. The choice is between CARE benefits or the old final salary benefits for the remedy period.

Deferred members moving abroad: If you are a deferred LGPS member and have moved overseas, ensure that your current address is held by the administering authority — typically the pension fund of the council area where you last worked. If your contact details are outdated, McCloud election correspondence will not reach you. Log in to your online pension account (each LGPS fund operates its own) and update your address.

The deadline for McCloud elections is scheme-specific but must be made before retirement. Failure to elect results in a default allocation. For deferred members, the choice generally favours final salary benefits for the remedy period if the member received pay rises above inflation during 2015–2022.

Deferred Benefits: What Happens When You Leave

When an LGPS member leaves employment with at least two years' qualifying service, they become a deferred member. Their accrued pension is "preserved" in the scheme and revalued until retirement.

Revaluation of deferred benefits: Deferred LGPS pensions revalue by CPI each April. There is no cap on upward revaluation (unlike some private sector schemes with a 2.5% cap). In the years 2022–24, with CPI at elevated levels, deferred LGPS members saw significant nominal increases in their preserved pension values.

Early retirement of deferred benefits: Deferred members can access their LGPS pension from age 55 (rising to 57 in 2028) subject to early retirement reduction factors. The factors are age-related and reduce the pension to reflect the longer payment period. For a member with a normal pension age of 67 who takes benefits at 57, the pension is reduced to reflect payment roughly ten years early — a potentially significant reduction.

Death benefits for deferred members: A deferred LGPS member who dies before retirement leaves a death grant of five times the annual deferred pension to nominated beneficiaries (subject to the LGPS discretion framework and any expression of wishes held by the fund). For an expatriate with a substantial deferred pension, this is a meaningful death benefit. Ensure your nomination form is up to date and is held by your administering authority.

Ill-health retirement: Deferred members who become permanently incapacitated may be eligible for immediate payment of deferred benefits on ill-health grounds. The criteria and process vary by administering authority, but the right exists within the LGPS.

LGPS Annual Allowance Considerations

The LGPS is a funded DB scheme. Annual allowance inputs are calculated using the DB formula: (pension growth × 16) adjusted for CPI. For most LGPS members, the pension input is modest relative to the £60,000 standard annual allowance. However, members with long service and strong pay progression, or those who transferred significant previous service into the LGPS, may accumulate larger annual inputs in promotion years.

For active members with incomes above the tapered annual allowance thresholds (adjusted income above £260,000), the taper applies in the same way as for NHS or civil service DB members. Senior officers of large councils, chief executives, and senior university professionals may be affected.

Scheme pays for LGPS: LGPS members can use scheme pays to settle annual allowance charges. The mechanism works the same as other DB schemes: a charge is met by reducing eventual pension benefits. The reduction is calculated by the administering fund's actuary.

LGPS Investment in the Context of Expatriate Planning

The LGPS is a funded scheme, unlike the NHS, Teachers, or Civil Service Pension Schemes which are pay-as-you-go (unfunded). This means each LGPS fund holds actual assets — pooled through one of the eight new investment pools established under the government's pooling reforms. The LGPS has assets of approximately £350 billion across 86 funds in England and Wales.

For expatriate members, the funded nature means:

• There is no theoretical risk of benefits being affected by government fiscal decisions in the same way as unfunded public sector schemes
• The scheme is covered by the Pension Protection Fund (PPF) if an individual participating employer becomes insolvent — though this is rare given that the main local government bodies are public authorities
• CETVs for LGPS deferred benefits reflect actual fund investment performance and actuarial assumptions, and are calculated on request

CETV applications: LGPS deferred members can request a cash equivalent transfer value if they are considering transfer to a personal pension, SIPP, or QROPS. The CETV represents the present value of the deferred pension, discounted at a rate set by the fund's actuary. CETVs from LGPS funds can be substantial for long-service members.

DB transfer advice is legally required where the CETV exceeds £30,000. Given the quality of LGPS benefits — guaranteed, inflation-linked, backed by public sector employers — the bar for recommending a CETV transfer is very high. Most regulated advisers will not recommend transfer from LGPS deferred benefits except in exceptional circumstances (e.g., serious ill-health reducing life expectancy).

Pensions for Admitted Body and Outsourced Employees

Many LGPS members are employed by "admitted bodies" — charities, contractors, and social enterprises that have been admitted into the LGPS to allow their workers to participate. When such an organisation closes, loses its local government contract, or is restructured, Section 75 debt provisions and wind-up rules apply.

Employees of admitted bodies who move abroad carry the same deferred benefit rights as direct council employees, but the security of their benefits may depend on the financial covenant of their former employer and the administering authority's policy on admitted body liabilities.

Practical Steps for LGPS Members Moving Abroad

1. Obtain a deferred benefit statement from your administering LGPS fund, ideally before you leave the country. This sets out your preserved pension, projected value at NPA, and death benefits.

2. Confirm your contact details with the fund. An overseas address is perfectly acceptable; what matters is that correspondence reaches you.

3. Review your expression of wishes for death benefits. Named beneficiaries and next-of-kin details should be current.

4. If you are approaching age 55 (57 from 2028), understand the early retirement reduction factors that apply to your specific fund. These are published in each fund's actuarial assumptions.

5. Consider whether to transfer if you have received a CETV offer or are contemplating international pension consolidation. Take regulated independent advice before making any transfer decision.

6. Review the tax treatment of LGPS pension income in your country of residence. Many tax treaties exempt UK government scheme pensions from overseas taxation (taxable only in the UK), which can be a significant advantage for LGPS members living in lower-tax jurisdictions.

How Global Investments Can Help

Global Investments advises former local government, education, housing, and third-sector employees on the role of LGPS deferred pensions in their international financial planning. Understanding the tax treaty treatment of LGPS income in your country of residence, modelling the optimal retirement age to balance pension income and tax efficiency, and ensuring death benefit nominations are properly managed are all areas where specialist guidance adds real value. Contact our team to discuss your LGPS position as part of a comprehensive expatriate financial review.

This guide is for information only and does not constitute financial, tax, or legal advice. LGPS and pension legislation can change. Always seek regulated financial advice tailored to your circumstances.