Local Government Pension Scheme: LGPS 2014 CARE Explained

The Local Government Pension Scheme (LGPS) is the occupational pension scheme for local government employees in England and Wales, and there are broadly equivalent schemes in Scotland and Northern Ireland. It is one of the largest funded defined benefit pension schemes in the world, with assets in excess of £300 billion held across 86 separate administering authorities (typically county or unitary councils). Unlike the NHS, Teachers', and Civil Service schemes, the LGPS is funded — employers and employees contribute to a real investment fund — rather than financed on a pay-as-you-go basis.

This distinction has practical consequences: LGPS employers must manage their funding positions, contribution rates are subject to triennial actuarial valuation, and the investment performance of the administering authority's fund affects employer contributions over time. For members, however, the benefit promise is the same defined benefit guarantee as other public sector arrangements.

The LGPS 2014 Reform

Prior to April 2014, the LGPS in England and Wales operated on a final salary basis: 1/60th accrual per year, Normal Pension Age (NPA) 65, with an automatic lump sum of three times pension for service before March 2008. The 2014 reform introduced the current Career Average Revalued Earnings (CARE) arrangement.

Legacy LGPS service before April 2014 is preserved under the old final salary rules and will be paid at retirement based on pensionable pay at the date of leaving (or date of retirement if still in the scheme) and total pre-2014 service — subject to revaluation by CPI in deferment.

The LGPS 2014 CARE Scheme: Key Features

Accrual rate: Each year, 1/49th of your pensionable pay is added to your pension account. At 2.04%, this is the most generous accrual rate among the main public sector CARE schemes (compared to 2.32% for Alpha, 1.85% for NHS, and 1.75% for TPS — though direct comparison requires care since the other schemes use percentage rates against which the 1/49th fraction is applied differently).

For a member earning £49,000 of pensionable pay in 2025–26, the pension earned that year is £1,000. For earnings of £35,000, the annual accrual is approximately £714.

Revaluation: Accrued LGPS pension is revalued in line with CPI each April. This is less generous than Alpha's CPI+1.5% but in line with the NHS and TPS. The revaluation protects the purchasing power of benefits during your working life.

Normal Pension Age: For LGPS 2014 service, NPA is aligned with State Pension Age — currently 67, with a prospective increase to 68 subject to review. Pre-2014 LGPS service has an NPA of 65.

Pensionable pay: Under LGPS 2014, pensionable pay includes basic pay, shift allowances, contractual overtime, and certain other contractual elements. It excludes non-contractual overtime, non-contractual bonuses, and expenses. Administering authorities produce guidance for member categories and employers.

Early Payment Reduction

If you take your LGPS pension before your NPA, an actuarial reduction is applied to reflect the longer payment period. The reduction factors are set nationally and reviewed periodically. As a rough guide, drawing pension 3 years before NPA reduces it by approximately 15%; drawing 5 years early may reduce it by around 23%.

However, from age 55 (rising to 57 from April 2028), members may draw their pension voluntarily. Employers may also offer "flexible retirement" — allowing a member to draw some or all of their LGPS pension while continuing to work, though this requires employer consent.

Additionally, members made redundant on or after age 55 may be entitled to immediate, unreduced payment of their LGPS benefits — a significant provision that makes compulsory redundancy at this age potentially very beneficial from a pension perspective. The same applies to members who are granted ill-health retirement.

Ill-Health Retirement

The LGPS provides two tiers of ill-health retirement for members who leave due to permanent incapacity:

• Tier 1 — if the member is unlikely to be capable of gainful employment (defined as work paying at least 25% of their former salary for at least 30 hours per week) before their NPA, the pension is enhanced. Their accrued pension is increased by 100% of their prospective service from the date of leaving to NPA. This is extremely generous.

• Tier 2 — if the member is unlikely to be capable of their own job for at least three years, but may be capable of other employment, the pension is enhanced by 25% of the prospective pension to NPA.

Ill-health assessments are conducted by an Independent Registered Medical Practitioner (IRMP) appointed by the employer or administering authority. Members can appeal decisions.

The 50/50 Section

An important feature of the LGPS not available in other major public sector schemes is the 50/50 section. Members can elect to move to the 50/50 section, under which they pay half their normal contributions and accrue half the normal benefits (effectively 1/98th per year). Auto-enrolment re-enrolment rules apply: after three years, the employer must check whether the member should be re-enrolled in the main scheme.

The 50/50 section is designed as a short-term option — for example, during periods of financial pressure — not as a permanent contribution reduction strategy. Moving to 50/50 reduces pension accrual, and members should consider this carefully before electing. Employer contributions continue in full even in the 50/50 section.

Additional Voluntary Contributions

LGPS members can make AVCs to enhance their retirement income. AVCs are held separately from the main LGPS benefit in a DC pot. At retirement, AVC funds can be:

• Used to purchase additional pension from the LGPS (a "shared cost AVC" arrangement at some administering authorities)
• Taken as cash (up to the permitted maximum tax-free amount)
• Used to purchase an annuity
• Transferred to a drawdown arrangement

Some administering authorities also offer Shared Cost AVCs (SCAVCs), where the employer matches a portion of the employee's AVC.

Since the LGPS does not provide pension flexibility (drawdown is not available from an LGPS pension itself), AVCs providing DC flexibility can be a useful complement.

Employer Discretions

The LGPS regulations give administering authorities and employers a range of discretionary powers that can significantly affect member benefits. Key discretions include:

• Whether to grant ill-health tier upgrades
• Whether to allow flexible retirement (phased drawdown while still employed)
• Whether to apply actuarial reductions to early payment for employer-approved early retirements (some employers waive these)
• Augmentation (adding notional service to the member's account)
• Whether to award a discretionary LGPS pension to someone not otherwise entitled

The exercise of these discretions varies between employers. Members facing redundancy or early retirement should check their employer's published discretions policy — often available via HR or the administering authority website.

Contributions

LGPS member contributions are tiered by actual pensionable pay for the CARE section. Rates for the main section (England and Wales, 2025–26):

Pensionable Pay	Contribution Rate
Up to £17,800	5.5%
£17,801 – £28,000	5.8%
£28,001 – £45,600	6.5%
£45,601 – £57,700	6.8%
£57,701 – £81,000	8.5%
£81,001 – £114,800	9.9%
£114,801 – £135,300	10.5%
£135,301 – £203,000	11.4%
£203,001 or more	12.5%

Employer contributions are set by the triennial actuarial valuation and vary by employer — typically ranging from around 17% to over 30% depending on the funding position of the specific fund.

Transfer Out Considerations

Deferred LGPS members can transfer their pension to another UK-registered pension scheme. Regulated financial advice is required for CETVs of £30,000 or more. Unlike the NHS, TPS, and CSPS, the LGPS is funded, and CETVs are calculated against the fund's actual liability — meaning the transfer value methodology varies between administering authorities.

The LGPS cannot be transferred to a QROPS. Despite being a funded scheme, the LGPS is still classed as a public service pension scheme for regulatory purposes, and QROPS transfers are prohibited.

Most financial advisers will recommend retaining LGPS benefits — the guaranteed, inflation-proofed pension, combined with the employer contribution, is very difficult to replicate in a DC environment. However, for members with significant DB pension accrual across multiple schemes and who face annual allowance issues, or for those emigrating permanently, transfer can occasionally warrant more detailed analysis.

Death Benefits

Active LGPS members receive a death grant of three times their assumed pensionable pay if they die in service. A survivor's pension is payable to a spouse, civil partner, or cohabiting partner meeting the qualifying conditions. A children's pension is also payable to dependant children.

Deferred members' death grants are typically based on the member's CETV or a multiple of their deferred pension, depending on scheme rules.

Compliance note: LGPS rules and contribution tiers are set by the Ministry of Housing, Communities and Local Government, and individual administering authorities have discretion in certain areas. Figures in this guide are indicative for England and Wales as at June 2026. Scotland and Northern Ireland operate separate but broadly comparable schemes. This guide is for information only and does not constitute regulated financial advice. Regulated financial advice from an FCA-authorised specialist is required before transferring a DB pension.

How Global Investments Can Help

The LGPS is a substantial pension benefit for anyone who has worked in local government, and maximising its value requires understanding the interaction with other pension and investment assets. Global Investments advises current and former local government employees on retirement income planning, the decision of when and how to draw LGPS benefits, the interaction with the State Pension and private savings, and — for those now living or working abroad — the tax treatment of LGPS income in different jurisdictions. Contact our team to discuss your situation.