The Local Government Pension Scheme (LGPS) is a:
- Occupational Pension Scheme
Which is a company or workplace pension scheme set up by the employer for their employees to join. Both the employee and employer contribute to the pension fund - Contributory scheme
Which means members must pay contributions into the scheme. The alternative is a non-contributory scheme which members do not have to pay contributions to in order to receive benefits - Statutory Pension Scheme
Which is a scheme established by Acts of Parliament and administered in line with regulations - Registered Pension Scheme
Which is a scheme registered under Chapter 2 of Part 4 of the Finance Act 2004, therefore all contributions paid can receive tax relief at source - Funded Pension Scheme
Which means the scheme invests the contributions paid in to accumulate more funds in order to cover the pension payments due. Note: the alternative is an unfunded scheme, also known as 'pay as you go'. This means the benefits paid are funded only by the contributions paid in and any deficit is covered by the pension sponsor, for example, the government - Defined Benefit Scheme
Which means that benefits paid are defined in legislation and provides pre-determined retirement benefits based on the employee earnings and membership. Note: the alternative is a defined contribution scheme (also known as money purchase scheme) or a collective defined contribution scheme. This means benefits depend on the amount of money paid in and investment returns - Career Average Revalued Earnings (CARE) Pension scheme
Which means that benefits are worked out using the pensionable pay in each scheme year. The pension earned each scheme year is added to the member's pension account and inflation is then added to keep its value - The LGPS was a contracted out pension scheme up to 5 April 2016
The scheme was contracted out of the State Earnings Related Pension Scheme (SERPS), known as State Second Pension (S2P). S2P is the additional amount to the basic State Pension. By being contracted-out of S2P, LGPS members paid a lower rate of National Insurance contributions whilst they were working but, if they are entitled to receive S2P when they reach State Pension age (SPa), they do not receive it. Instead, they pay LGPS contributions to provide for occupational pension benefits that are guaranteed to be at least as good as those offered by S2P. The Employer Contracting-out Number (ECON) for Kent Pension Fund was E3900002R and the scheme Contracting-out Number or (SCON) is S2700156R - Forty-ninth Pension Scheme
Means the scheme has an accrual rate of one forty ninth (1/49th). For each year of membership a pension is built up of one forty ninth (1/49th) of the pensionable pay in that year.