1. Regulation 58(1) of the Local Government Pension Scheme Regulations 1997 ("the LGPS Regulations") provides an opportunity for members to convert a lump sum benefit into pension. As a result of an amendment made to these regulations on 7 March 2001, the option is no longer restricted to members who have attained age 50. Thus, a member of any age who has become entitled to an immediate payment of a pension may elect for the whole or a part of the retirement grant or ill-health grant, as appropriate, to be used instead to provide additional pension. Regulation 58(4) provides that a member who has made such an election becomes entitled to such additional pension as is shown in guidance issued by the Government Actuary.

2. Guidance under Regulation 58(4) was given for the first time in a note dated 22 January 1998. This new Note, which supersedes the Note of 22 January 1998, has been prepared by the Government Actuary’s Department for the Department of Transport, Local Government and the Regions, and issued to them for onward transmission to administering authorities and employing authorities. The purpose of this Note is to revise the existing factors for converting a lump sum into pension in the light principally of changes in financial conditions, and to provide factors for members under age 50. Apart from changing the factors and including factors at ages under 50, the remainder of the guidance from the earlier note is reproduced largely unaltered. The guidance note of 22 January 1998 should no longer be used.

3. The tables attached to this note provide factors which show the additional pension to the member for each £100 of lump sum given up, according to age at the date the member becomes entitled to immediate payment of pension. Separate factors are provided for men and women, and for married and unmarried members. Factors for members over age 70 and under age 30 will be provided by the Government Actuary’s Department on request.

Allowance for spouses

4. It is not possible, under the LGPS Regulations, for the additional pension to be payable just to the member, with no additional pension to the spouse and children after the member’s death. As the long-term pension to a member’s spouse is normally half the member’s pension, and the children’s pension is a fraction of the member’s, the contingent pension to a member’s spouse and children will be increased as a result of an election that part or the whole of the lump sum should be used to secure additional pension.

5. Members who are not married when they retire are, on average, less likely to be survived by a spouse and/or children entitled to a pension under the LGPS Regulations than members who are married. Also the spouse’s pension is likely to be less than half the member’s due to a provision in the LGPS Regulations that benefits attributed to service before 6 April 1978 (men), and before 6 April 1988 (women), should not include benefits for the spouse of a post-retirement marriage. Accordingly, the tables attached show a somewhat higher pension for a member who is not married when he retires than for a member who is married. The more favourable terms applicable to single members should be used only when the administering authority is satisfied that the member is not married.

Period for which the factors apply

6. The factors are calculated in accordance with assumptions which are consistent with market conditions current at the date of issue to the Department. If and when market conditions alter significantly in the future, it will be necessary to issue revised factors.