The LGPS is a statutory, funded pension scheme, the Scheme is very secure as the benefits are defined and guaranteed in law. The Scheme is contracted-out of the State Second Pension (S2P) and will, in general, provide benefits at least as good as most members would have received from being members of the S2P.
Employees are eligible to become a member of the Cheshire Pension Fund and benefits can be transferred into the fund from other pension schemes to which you may have contributed. Independent financial advice should be sought, before any transfer is made as it may not always be the best option for you to transfer.
S2P is the additional state pension, this was called the State Earnings Related Pension (SERPS) until 6th April 2002. The amount of SERPS pension you received was based on a combination of the amount of your National Insurance contributions, and how much you earned. S2P provides a more generous additional State Pension to low and moderate earners and certain carers and people with long-term illness or disability. Any previous SERPS entitlement you have is protected, if you built up an entitlement to a second pension before April 2002 you will keep it, whether you have reached retirement age or not.
Personal Pension Plans are provided by various institutions such as banks, building societies, insurance companies and unit trusts. They invest on your behalf a lump sum or a regular amount paid by you every month.
The final value of your pension fund will depend on how much you have contributed and how well the fund's investments have performed. Set up and running charges are made to your fund by the companies that run the personal pension.
Tax relief is provided by the government on your contributions to boost the value of your pension. When retiring you can usually take up to 20 per cent of your fund as a tax-free lump sum. An annuity (a regular income payable for life) is bought from a life insurance company, with what has been built up from the rest of the fund. Alternatively you can take an income from the remainder of your fund while it continues to be invested called 'income withdrawal'.
The stakeholder pension works in much the same way as the personal pension (described above). The way in which they differ is that the stakeholder pensions by law, must meet a number of minimum standards to make sure they offer value for money, flexibility and security. These standards include:
- Low charges - managers of the fund can charge fees of up to one and a half per cent of your pension fund each year for the first 10 years and thereafter up to one per cent.
- Flexibility - the ability to switch to a different pension provider without charge, start contributions from £20, paying weekly, monthly or less regularly and stop, re-start or change your payments whenever you want.
- Security - the scheme will be run by trustees or an authorised stakeholder manager, who will make sure that the scheme meets the various legal requirements.
Further information about joining the LGPS
|