Please explain Local Gov Pension Scheme

[AnxietyLevelMax]

its driving me nuts…literally don’t understand anything i read… if someone earns 40k per year…how much shall we expect in our pension pot after a year?

Depends how the fund does!

Well i get that but it still gives me nothing.

based on the example below, ‘Tom’ will have £1,592 after three years on salary of £25k. looks pretty shitty and definitely not better than any standard pension scheme like standard life..

member.wiltshirepensionfund.org.uk/article/3315/How-is-my-LGPS-pension-calculated#:~:text=Your%20CARE%20pension%20is%20built,for%20LGPS%20is%201%2F49th

It's based on your salary so you build up 1/49th each year. If you earn £40k after 1 year you've built up £816 income in retirement. After 20 years in the scheme you would have a pension income of £16,000.

It's not really a pot as it's a defined benefit scheme - much much better than a private sector pension as its guaranteed.

No it doesn't- it's guaranteed

It's better because the £1,592 is an annual income. It would take a pot of around £32k to buy that income with a defined contribution pension.

Thank you @Redlettuce
LGPS supposed to be that good but i still dont see it.. i work part time and take home 22k and my contribution and my employer contribution gives me around 1.8k in my pension pot after a
year of work. so how come LGPS only gives half of it on salary twice mine? Whats so good about it?

Because it’s not a pot - it’s a guaranteed sum.

It's an annual income so you potentially get that much every year for 20 plus years in retirement.

Guaranteed sum of like £70 per month, after
1 year of work when a person retire? Doesnt seem to be so good to be honest.
if you work 10 years, your pension is only anout 8k + inflation rate 🤔 i am kinda shocked but maybe i am wrong
husband started a new job and will be joining LGPS and i am trying to figure out what it means

It is good, pensions are just expensive. To get an £8k income you would a pot of around £160k!!

But he surely wont have 8k income? If he saves in LGPS £819 every year for 10years on his 40k salary he will build up his pot and have 8k there. It wont be 8k monthly, its the total amount available?

I think you are misunderstanding.

I assume this is your DH, each year he'll be building up £800 odd of income per year in retirement and it's guaranteed. So after 10 years he'd have a guaranteed income of £8k per year, 20 years 16k per year. Plus it's inflation linked.

So if you get 1.8k in your defined contribution pot per year, that is invested, can go up or down, at retirement you will have to use the pot to buy an annuity or draw it down, making sure you don't take too much to use it up too quickly. You'd need around 300k in a pot to take 16k a year. So your 1.8k per year will get you nowhere near that.

Oh you are joking! I did not get that after reading multiple articles. It makes sense now. I get it. I assumed something completely different and just couldnt get my head around it. Thank you!!! I can go to sleep now, it was driving me mad 😂