Thinking of joining

Alternatives to the local government pension scheme

Personal pensions

You can choose to take out a Personal Pension through an insurance company, bank, building society, unit trust or friendly society.

The money you pay during your working life is invested to build up a cash fund at retirement which is used to buy an annuity to provide you with a pension.

Up to 25% of the fund can be taken as a tax-free lump sum at retirement. You can take Personal Pension benefits at any time from age 55.

You do not need to transfer your pension arrangement if you move to new employment outside local government (or an associated employer). But you should remember that a Personal Pension

  • Depends on investment performance and the state of the Stock Market at the time you retire - neither can be guaranteed
  • May be significantly reduced if you want family benefits or limited index linking
You will get tax relief on the payments you make, but your employer will not normally pay towards such a policy

Commission and administration charges will reduce the amount actually invested to provide your pension. These costs vary but can be considerable.

The cost

Contributions vary according to the level of retirement benefits wanted. The lower the contributions, the lower the retirement benefits, so you need to make sure that you have some idea of the level of retirement benefits you are aiming for. Personal pension providers will give you projected estimates.

State pension

The State Pension Scheme has two parts:

  • a flat rate basic pension
  • an additional earnings related pension 

A flat rate basic pension

This is paid to everybody at State Pension age. State Pension age is rising on a phased basis to 68 for both men and women. More information about your State Pension age can be found at the GOV.UK website.

The basic pension you get depends on your National Insurance contribution record.

An additional earnings related pension

This is known as the State Second Pension. The amount you get depends on the earnings on which you have paid NI contributions. State pensions are fully index linked.


You will not get any tax relief on this additional contribution.

Relying on the State for your pension is only slightly cheaper than joining local government (or an associated employer) Pension Scheme.

The essential thing to remember is that you should make your pension arrangements as early as possible in your working life. Delay will make it more expensive to ensure adequate arrangements later

Page last updated: 22 September 2017