The Government made a change from 6 April 2016 that resulted in employers and employees in 'Defined Benefit' pension schemes (including the LGPS and all other public sector schemes) paying more National Insurance (NI) from this date.
As a member of the LGPS, the NI rebate you received on some of your earnings ended on 6 April 2016.
The reason for this change was due to the Government introducing a new state pension for anyone retiring after 5 April 2016, which removed the need for an additional state pension (something that LGPS members did not contribute towards) and this is why the NI rebate has stopped.
The previous State Pension came in 2 parts:
- Basic State Pension - This was received by all workers who paid or had been credited with NI contributions. To receive a full basic State Pension, you needed at least 30 qualifying years. It was a fixed amount.
- Additional State Pension - How much you got depended on the workplace pension you were a member of, your earnings and whether you claimed certain benefits. This was not fixed.
To relieve members of the burden of paying for both an occupational pension and additional State Pension, contracting out was introduced in April 1978. This meant that you wouldn't receive an additional State Pension on reaching state pension age (SPA), but instead you'd benefit from paying less NI contributions and being a member of your occupational pension scheme.
For more information you can read the Department for Works & Pensions Changes to the State Pension Q&A factsheet.
Read our factsheet ‘Your State Pension Question and Answers’ for more details about state pension.