Leaving the Scheme before Retirement
If you leave your job with an LGPS employer you have 2 options:
Been a member of the LGPS for less than 2 years?
If you have been in the scheme for less than 2 years, and you have not transferred in any pension rights from a previous non-local government scheme, you are eligible for a refund of contributions as long, as you have not started working for another local government employer within 1 month and 1 day of leaving. The refund will have tax and, if applicable, National Insurance deducted. Please note that the tax is not income tax and is not refundable.
You can also ask for your contributions held in the scheme to be transferred to another Pension scheme in the future (providing you have been a member of the LGPS for at least 3 months).
You are able to delay your decision until you either re-join the LGPS, transfer your benefits to a new pension arrangement, or want to take a refund of contributions. Where you delay your decision you will have what is known as a deferred refund pension account. However, this account can only be held in the Fund for a maximum of 5 years or until you reach 75, whichever is earlier. If you have not transferred your benefits to a new pension arrangement or re-joined the LGPS by that time, a refund of contributions will automatically be payable to you.
If you have 2 or more jobs where you pay into the LGPS at the same time and you leave 1 (or more) but not all of them, you cannot have a refund of your contributions from the job (or jobs) you have left. Instead, you will be able to transfer your benefits to the job you are continuing in. The amount of membership you will be granted in the continuing job will be adjusted to reflect any difference in the whole-time rates of pay between the jobs.
If you are entitled to a refund the Fund will write to you with a form for you to complete to elect whether you wish to claim a refund of contributions (in which case you will need to provide your bank details) or transfer to another scheme. This form is not sent out until a month and a day after your employment ceases to ensure that you have not rejoined the LGPS during this time period, and remain eligible for a refund.
Been a member of the LGPS for more than 2 years?
Scheme members who cease employment prior to normal retirement age are entitled to deferred benefits. These benefits are adjusted each year by inflation and become payable at normal retirement age. Confirmation of the date your benefits are due to come into payment can be obtained from the Pensions Team.
You may investigate transferring your deferred benefits to a new pension arrangement at any age prior to the year in which your benefits are due for payment. However, benefits within the Local Government Pension Scheme are valuable and you are advised to seek independent financial advice prior to transferring them elsewhere. If you are considering transferring your benefits out of the LGPS, please read our information on Transferring Benefits Out of the LGPS.
Please remember to keep the Fund informed of any changes in your address in order that your deferred benefit statement can be issued.
If you are entitled to an award of deferred benefits, your deferred benefits will be calculated after you cease your employment, and a statement of these benefits will be sent to you. You will also receive an annual deferred benefit statement which can be viewed through ‘My Pension Online.’
Leaving the Scheme FAQs:
What happens if I was paying additional contributions?
If you were paying additional contributions arranged through the pension scheme, either Additional Voluntary Contributions (AVC’s) or Additional Regular Contributions (ARC’s), your contributions will cease when you leave.
The value of your AVC fund will continue to be invested until it is paid out. Your AVC plan is similar to your main scheme benefits: it can be transferred to another pension arrangement, be drawn at the same time as your main benefits, or deferred until the eve of your 75 birthday at the latest.
With regard to ARC’s if your employment ends before you complete the purchase, you will be credited with the amount of pension purchased. This is calculated as the amount of pension being purchased, multiplied by the contributions paid and divided by the total cost.
What happens if my employer makes me redundant or retires me on the grounds of business efficiency?
If you are aged 55 or over, your benefits are payable immediately without any early retirement reductions if your employer makes you redundant or you are retired on the grounds of business efficiency.
If you are under 55, your entitlement is to deferred benefits.
What happens if I have been dismissed on the grounds of gross misconduct?
If you have been dismissed on the grounds of gross misconduct your former employer may recover or retain the lesser of :
- the amount of the monetary obligation; or
- the value of the time of recovery or retention of all benefits in respect of the former employee with respect to that person’s previous membership (as determined by an actuary, except where the benefits is a refund of contributions).
In this event your previous employer must give you 3 months notice and a statement showing the amount to be recovered.
Opting out of the scheme
Although membership of the LGPS is automatic in many cases, it is not compulsory and you can cancel your membership at any time. If you are thinking of electing to opt out of the Local Government Pension Scheme, remember the LGPS is one of the best occupational pension schemes available.
Whatever your reasons for considering opting out of the scheme, we ask that you give this matter careful consideration before making a final decision. You may wish to take financial advice before making a decision to opt out. If you are opting out of the LGPS due to advice you have received, you should ask for this advice in writing.
In most cases opting out won’t save you as much in take home pay as you may think. You may pay more in tax if you opt out of the LGPS. A basic rate tax payer paying pension contributions of £100 a month will pay £20 more tax.
To find out more information about being a member of the LGPS see benefits of joining the LGPS.
If you still wish to opt out for the scheme see opting out of the LGPS for information on how to do this.