Transferring Benefits Out Of The LGPS
If you are joining another pension arrangement, you may wish to consider transferring your LGPS benefits. In order to make a transfer, the receiving scheme must meet HM Revenue and Customs conditions.
Before considering a transfer of benefits please ensure you have read the web page and information leaflet on Pensions Liberation, and the Freedom and Choice Q&A as there can sometimes be a tax charge if benefits are taken out as cash before retirement, as well as a reduced retirement income.
An election to transfer must be made at least 12 months before your Normal Pension Age.
If you transfer your LGPS benefits and you have paid Additional Voluntary Contributions (AVCs) arranged through the LGPS (in-house AVCs), you must also transfer your AVC fund.
Your new pension provider will require a transfer value quotation which, under the provisions, the pensions team will guarantee for a period of three months from the date of calculation. Your new pension provider can then advise you of the additional benefits the transfer will buy in their scheme. A written option to proceed with the guaranteed transfer value must be received within the three month guaranteed period. If you want to investigate this option you will need to contact the Help Desk.
If a full transfer payment is made, you will not be entitled to any further benefits from the Fund for yourself, your spouse, civil partner, eligible cohabiting partner or eligible children and you will be bearing all of the investment risk which could significantly affect your future pension benefits.
Freedom and Choice- Transfers from the LGPS to Defined Contribution (DC) pension schemes
Pension reforms known as ‘Freedom and Choice’ have changed the way an individual aged fifty five and over can access any Defined Contribution (DC) pension savings they may have. These changes came into force on 6 April 2015.
It is important that as a member of the Local Government Pension Scheme (LGPS) you understand that you are a member of a 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 which will 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’.
A Freedom and Choice Q&A factsheet has been developed to help you understand the changes.
Taking benefits under pension freedom rules
The money purchase annual allowance (MPAA) applies if you have taken pension benefits flexibly under ‘pension freedom rules’ on, or after, 6 April 2015. The MPAA for the tax year 2016/2017 was £10,000, this was reduced to £4,000 for the year 2017/18. If you are subject to the MPAA, you will incur a tax charge on any subsequent contributions to money purchase pensions which exceed this limit in any tax year. This is based on both contributions made by you, or on your behalf. In any year if you exceed the MPAA, your annual allowance for other types of tax-relieved pension saving, such as defined benefits, is reduced by £10,000 to £30,000.
Pension Liberation – Transferring benefits out of the LGPS for cash before retirement