Member contributions

Introduction

The LGPS contribution rate a member pays depends on their annual pay. There are two sections in the LGPS – the main section and the 50/50 section. The table below shows the pay bands and contribution rates for 1 April 2025 to 31 March 2026 for both sections. Find out more about the Main section and the 50/50 section.

Table 1: LGPS employee contribution bands England and Wales 2025/26

The Scheme year runs from 1 April to 31 March. The pay bands are increased each 1 April in line with the cost of living, if it is greater than zero. The contribution rates could change in the future. They should not be hard-coded into payroll programmes.

As an employer, you may have to review contributions paid or work out missed contributions for an earlier Scheme year. To help you, we have provided a history of LGPS member contribution rates from the 2014/15 Scheme year

The employer must decide an LGPS member’s contribution rate:

• when a new member joins the Scheme. This may be when their employment starts, they become eligible for membership at a later date, they join the Scheme under automatic enrolment rules or they opt in to the LGPS
• at the beginning of each Scheme year – 1 April. If the member is paid other than monthly, the employer must decide on the contribution rate in the pay period that includes 1 April.

The employer may also review a member’s contribution rate more frequently. They may do this if the member changes job in the middle of the Scheme year, or if there is a material change which affects the member’s pensionable pay during the year. Find out more about Pensionable pay.

We recommend that each employer has a written policy on:

• allocating member contribution rates and
• when the employer will review a member’s contribution rate, other than when they first join the LGPS and each 1 April.

This is a non-mandatory employer discretion. Employers are not required to have a written policy on this, but having one will help to ensure that employees are treated fairly and consistently. Find out more about Employer discretions.

Choosing and reviewing member contribution rates

Method 1. Review each pay period: This option is generally adopted by an employer who has automated the process of allocating contribution rates on the payroll system. The contribution rate is assessed each pay period. For a monthly paid employee, the pensionable pay in a month is multiplied by 12 to find the annual pay. The contribution rate that month is based on that annual pay figure. A similar approach could be adopted for employees paid weekly, four-weekly or each lunar month by using an appropriate multiplier to find the annual pay.

Advantages:

• can be used for all employees whether they work fixed hours, receive variable overtime payments or have no fixed working hours
• easy for employees to understand
• employees all treated the same
• simpler to automate.

Disadvantages:

• the average contribution rate paid at the end of the Scheme year may not be the contribution rate that applies to the member’s total pensionable pay for the year. This could happen when:
  • a member’s annual pay is very close to one of the contribution band thresholds and their pay changes throughout the year
  • there is a mid-year pay change, for example due to a promotion or change in working hours
  • a member’s pensionable pay in a pay period is increased because they receive pay arrears, for example when a pay award is backdated.

Where the average rate is higher than the rate that the member’s annual pay falls into, this could lead to complaints.

• the employer will have to notify members more frequently about a change in contribution rate than they would under other methods
• the member’s contribution rate may change when there is a relatively minor change to their pay. This is not strictly in line with the regulations which allows an employer to change the member’s contribution rate when there is a change in employment or a material change in pensionable pay
  

Method 2. No extra contribution band reviews: The employer assesses the contribution band when an employee joins the Scheme and at each 1 April. They do not review the rate at any other time. The annual pay is based on the member’s contractual pay, including the annual rate of any permanent or temporary pensionable allowance that is paid regularly.

Advantages:

• easy for employees to understand
• no need to inform members about a new contribution rate other than on joining and each April
• simpler to automate.

Disadvantages:

• a different approach would be needed for members with no fixed hours. Employers would need to estimate annual pay for these members based on an assumption about the number of hours they will work.
• pay for additional hours and overtime is not included. This means that the employee contributions will generally be lower than they would be under method 1. Employer contributions might increase as a result.
• the member’s contribution rate would not change when there is a material change that affects their pensionable pay in a Scheme year. If the member increased their hours or moved to a higher graded post, they may pay lower contributions than they would have done based on their actual pensionable pay in the year. If the member reduces their hours, moves to a lower graded post or stops receiving an allowance, they may pay higher contributions than they would have paid based on their actual pensionable pay in the year. This may make complaints more likely.

Method 3. Include an estimate of pay for additional hours. To reduce the risk of underpayment of member contributions, the employer could include an estimate of the pay the member is likely to receive for working additional hours or overtime in the Scheme year. Whether this approach yields a fairer result than method 2 depends on how accurate the employer’s estimate of pay for additional hours and overtime is.

Advantages:

• easy for employees to understand
• no need to inform members about a new contribution rate other than on joining and each April.

Disadvantages:

• less simple to automate, therefore more time-consuming
• a different approach would be needed for members with no fixed hours
• inaccurate estimates could lead to perceived overpayment of contributions and member complaints
• the member’s contribution rate would not change when there is a material change that affects their pensionable pay in a Scheme year.

Method 4: Review when there is a material change in pensionable pay. The employer adopts method 2 or 3, and in addition reviews the contribution rate when there is a material change in pensionable pay. The employer should define a material change in their policy. This might include a change in working hours per week or working weeks per year, a change in job, a change in grade or a regular allowance starting, ending or changing.

Advantages:

• fairly easy for employees to understand
• less frequent need to inform members about a change in contribution rate.

Disadvantages:

• less simple to automate, therefore more time-consuming
• a different approach would be needed for members with no fixed hours.

Method 5: Review the cumulative totals. The employer reviews the member’s cumulative pensionable pay for the year, scales it up to an annual rate and applies the correct contribution rate based on that annual figure. That rate would be backdated to the start of the year. The employer could review the cumulative totals monthly, six-monthly, quarterly or at other points in the year. They would review the rate for members paid other than monthly at a similar frequency during the year.

Advantages:

• members pay a contribution rate that is appropriate based on their yearly pensionable pay.

Disadvantages:

• very hard for members to understand
• the employer will have to notify members more frequently about a change in contribution rate than they would under other methods. They will also have to explain that the rate has been backdated
• if a member’s pay is close to the threshold of a pay band, there may be a backdated change in contribution rate each time the rate is reviewed, meaning that they alternate between receiving a refund of contributions and paying arrears
• depending on the frequency of the review, members may have to pay significant arrears of pension contributions when they move up to a higher contribution band
• Easy to programme? No idea. Tempted not to mention it.

Estimating variable payments

If an employer adopts method 2, 3 or 4, or method 5 and does not review the cumulative pensionable pay every pay period, they will need to estimate every member’s annual pay when they first join the LGPS and each 1 April.

If a member works fixed hours and is not expected to work additional hours or non-contractual overtime, this is relatively simple. Their contribution band is based on their annual contractual pay – basic pay, permanent and temporary allowances paid regularly and pay for contractual overtime.

If a member works fixed hours and is expected to be paid for some additional hours and/or non-contractual overtime, the employer may choose to include an estimate of their annual pay for the extra hours when choosing the appropriate contribution rate. They could base this estimate on:

• the number of additional hours or non-contractual overtime hours the member worked in the previous year, or
• if the employee is new, the number of additional hours or non-contractual overtime hours worked by the previous post-holder.

If an employer adopts method 2, 3 or 4, or method 5 and does not review the cumulative pensionable pay every pay period, they will need to estimate annual pay for members with no fixed hours. They could do this by:

• estimating the number of hours the member is likely to work in a year – based on the hours worked in the previous year, or by the previous post-holder
• allocating the member to the lowest band (5.5%) and reviewing the rate at the appropriate time.

There are implications for employers and employees if the estimates are inaccurate:

• if the employer does not review the rate during the year and they have under-estimated the member’s pay, contributions would be too low and the employer would meet the cost
• if the employer does not review the rate during the year and they have over-estimated the member’s pay, contributions would be too high, making member complaints more likely
• if the employer does review the rate during the year and they have under-estimated the member’s pay, the member may end up paying significant arrears of contributions when the rate is reviewed.

Informing employees about their contribution rate

Once the employer has determined an appropriate contribution rate individually or by an automated process, they must notify the employee of:

• the contribution rate to be deducted from the employee’s pensionable pay and
• the date from which the rate is payable

as soon as is reasonably practicable. The employer may decide how to notify the employee, but the notification must:

• contain a conspicuous statement telling the member where they can get further information about the decision
• notify the employee of the right to appeal to an adjudicator (the person the employer has appointed to consider appeals) against the decision
• notify the employee that any appeal must be lodged within six months of being notified of the initial decision, or such longer period as the adjudicator allows
• set out the job title and address of the adjudicator and
• notify the employee that they have the right to ask the administering authority to undertake a review of the adjudicator’s decision, if they are unhappy with it. The member must request the review within six months of the adjudicator’s decision.