LGPS (Local Government Pension Scheme): Annual Allowance & McCloud Guide

The scheme at a glance

Who it is for

Local-government workers in England and Wales, run locally

Accrual rate

1/49 of your pensionable pay each year (1/98 in the 50/50 section)

Revaluation

CPI, applied through the annual HM Treasury revaluation order

Normal Pension Age

Linked to your State Pension Age, with a minimum of 65

How the LGPS works

The LGPS (England and Wales) is the career-average (CARE) pension for local-government workers.

How your pension builds:

•You earn 1/49 of your pensionable pay as pension in each year of service, or 1/98 if you are in the optional 50/50 section.

•Each year's slice is revalued by CPI, applied through the annual HM Treasury revaluation order, so it keeps its value.

•Normal Pension Age is linked to your State Pension Age, with a minimum of 65.

•You track and manage it through your own LGPS fund's online service. The name varies by fund.

Funded and run locally:

•The LGPS is a funded scheme: it holds invested assets, unlike the pay-as-you-go public-sector schemes.

•It is run by around 86 local administering authorities across England and Wales.

Source: https://www.lgpsmember.org/

The McCloud underpin in the LGPS (2014 to 2022)

The LGPS handles the McCloud remedy differently from every other public-sector scheme: there is no choice for you to make.

What it means for you:

•The LGPS underpin is applied automatically. At retirement your fund simply pays the higher of your CARE pension and a notional final-salary pension for the remedy period (1 April 2014 to 31 March 2022).

•There is no member choice to make. This is different from every other public-sector scheme, where you choose between two sets of benefits.

•Because the underpin is worked out for you, there is nothing to elect and no deferred decision to plan around.

There is nothing to do now for the underpin. The Annual Allowance can still be worth checking for the remedy years.

Source: https://www.lgpsmember.org/mccloud-remedy/

Why a step up to a senior grade can trigger a charge

The Annual Allowance is where LGPS members most often meet an unexpected tax bill, and a step up to a senior-officer or chief-officer grade is the classic trigger.

Why a promotion matters:

•A move into a senior-officer or chief-officer grade raises your pay, which raises how fast your promised pension grows.

•That growth is valued at 16 times the yearly increase, so one large rise can cross the £60,000 Annual Allowance.

•The scheme may not warn you, because it does not always know your other income or pensions.

Also worth watching: a high-inflation year, several LGPS employments stitched together, and outside income that can taper your allowance.

Source: https://www.gov.uk/guidance/pension-schemes-work-out-your-tapered-annual-allowance

Advice fees and the LGPS

Unlike most public-sector schemes, the LGPS has no dedicated route to reclaim professional fees for the remedy.

What this means:

•Funds hold only a rarely-used power to compensate actual financial loss, not professional fees.

•The McCloud underpin is applied for you automatically, so there is no remedy choice to advise on.

Source: https://www.lgpsmember.org/mccloud-remedy/

Illustrative example

How a senior-officer step-up can trigger a £17,600 bill

A local-government officer steps up to a director role, a jump that can top £20,000. It re-rates their pre-2014 final-salary service, and the promised pension grows by about £6,500. Valued at 16×, that runs well over the allowance.

Rise in the yearly pension: +£6,500
That growth, valued at 16×: £104,000
The allowance for the year: £60,000
Tax on the £44,000 over the limit, at 40%: ≈ £17,600

Illustrative figures based on this scheme’s typical senior pay and a representative promotion. Your own Annual Allowance position depends on your service history, income and scheme rules.

Related guides

These guides cover the questions that usually come up next. They are written with NHS examples, but the Annual Allowance and McCloud rules they explain apply right across the public sector.

Annual Allowance

The £60,000 limit, the 16x valuation, and the taper explained.

Carry Forward

Use unused allowance from earlier years to reduce a charge.

McCloud Remedy

How the remedy period works and what your statement will show.

Illustrative, and independent

The worked example uses standard Annual Allowance mechanics and a representative promotion; your own position depends on your service, income and scheme rules. This guide is educational and is not personal advice. Remedy is not affiliated with your LGPS fund or HMRC.