Leaving the scheme before retirement
Can I opt out of the LGPS?
Yes you can opt-out of the LGPS but before you do there are some things to consider:
Refunds of your contributions paid
You should note you can only get a refund of your contributions already paid into the scheme in the following circumstances:
- If you opt out of the LGPS before completing 3 months membership you will be treated as never having been a member and your employer will refund to you, through your pay, any contributions you have paid during that time.
- If you opt out of the LGPS with 3 or more months membership and before completing the 2 years vesting period you can take a refund of your contributions (less any statutory deductions) or transfer out your pension to another scheme as long as you have not brought any previous pension benefits into the scheme and do not have any other LGPS benefits.
- If you have transferred some previous pension benefits into the scheme, or have other LGPS benefits, then this may prevent you from receiving a refund of your contributions even if you have been in the scheme for less than 2 years.
You should also note that even if you are eligible for a refund of your contributions you will not receive your total contributions back a refund is taxable at 20% and an adjustment also has to be made for any National Insurance reductions that were applied as a result of the contributions made.
If you are not eligible for a refund of your contributions paid
If you opt out of the LGPS and you are not able to have a refund of your contributions then you will be given deferred benefits in the scheme. You will generally have the same options as anyone leaving their job before retirement, except you cannot draw your deferred benefits unless you have left your job. Also, if you re-join the scheme, you will not be permitted to join the two periods of membership together. Instead, you will have two separate sets of pension benefits in the scheme.
The benefits you will be giving up
Before you opt out of the scheme you should consider the benefits the scheme gives you and consider taking Independent Financial Advice:
- A secure pension linked to your earnings each year
- Tax-free cash at retirement
- Redundancy and Efficiency Retirement
- Flexible retirement – if your employer allows this
- Tiered Ill Health Retirement
- A Lump Sum death grant of 3 times your salary
- Dependants Pensions, for your spouse or partner and any dependent children
- Tax Relief on your contributions
- Contributions from your Employer
- Flexibility to pay more or less contributions
- Peace of mind
- Freedom for you to choose when you want to take your pension.
Other options to reduce the costs of membership in the LGPS
If you are concerned about the cost of the LGPS you might want to elect to move to the 50/50 section of the scheme. The 50/50 section allows you to pay half your normal contributions in return for half your normal pension build up. To find out more about how the 50/50 section works and the benefits you could receive, visit the your contributions page.
Opt out of the LGPS
If you still want to opt out, please download the form below, fill out and return to your payroll department:
Can I get my contributions back?
If you have left the LGPS with less than two years service (the vesting period for the LGPS), you may be eligible for a refund of your contributions, minus any tax relief. If you are potentially eligible for this, you will receive the necessary forms from ERPF to claim your refund.
The vesting period covers all membership that you have in the LGPS under any fund, so it is important that you have completed your Previous Pension Rights form. If you have not already completed this, you can do this using the online form below:
What happens to my benefits when I leave if I cannot get my contributions back?
If you are not entitled to claim a refund of your contributions then your benefits will be deferred in the LGPS under the ERPF until your Normal Pension Age unless you choose to retire early or transfer your benefits to another pension provider. During the time your benefits are deferred in the Fund, they will be increased in line with the Consumer Price Index (CPI) each year from the date you leave.
More detailed information about deferred benefits is available under the Deferred Member section of the website including information on transferring your benefits to another pension provider and when you can get access to your benefits.
Can I take all of my benefits as a cash lump sum?
From 6 April 2015, reforms to workplace pensions created more freedom and choice in the way individuals aged 55 and over can access their defined contribution (DC) pension savings.
It's important that as a member of the Local Government Pension Scheme (LGPS) you understand that you are a member of a public sector Defined Benefit (DB) scheme and therefore the flexibilities introduced under 'Freedom and Choice' do not impact on how you can take your Defined Benefits from the LGPS.
There are, however, some indirect changes that do impact upon any members of the LGPS who are considering transferring the value of their accrued LGPS Defined Benefit pension rights from the LGPS to a DC arrangement offering 'flexible benefits'.
The questions and answers contained in the document below aim to help you understand these changes.
Can I transfer my benefits to another scheme?
If you have left the scheme and would like to investigate a transfer, please get in touch with your current pension scheme who will inform you of the best way to commence transfer proceedings. Your current scheme may send you information to forward to ERPF or send a request for the necessary information themselves.
