Are you considering opting out of the Local Government Pension Scheme (LGPS)?
If you are thinking of opting out of the LGPS, here are some things you should consider carefully.
- It costs less than you might think to be in the LGPS. If you pay tax, you get tax relief on your contributions. Opting out would mean you would pay more tax.
- The LGPS is one of the best occupational pension schemes in the UK and as a member you enjoy all the benefits listed below:
- If you opt out of the scheme with an entitlement to deferred benefits, you will not be able to combine those deferred benefits with any future period of membership. This will mean that, should you later re-join, the separate deferred benefits would not automatically become payable when you draw the benefits for the new period of membership. Please see the link to deferred details on our website setting out when deferred benefits can become payable and the circumstances whereby we would reduce them for early payment
- Have you considered the 50/50 option instead? The 50/50 option allows you to pay half your current contribution rate but build up half the pension. However, you retain full life assurance cover.
Benefits of being in the LGPS
The Benefits
Guaranteed Index-Linked Pension
A guaranteed index-linked pension, payable for life, based on your pay and how long you’re a member.
Tax Free Lump Sum
You can take a tax free lump sum when you retire.
Death Grant For Your Loved Ones
Lump-sum death grant of three times your pay if you die, paid to the people you choose.
Pension For Your Partner
Pension for your husband, wife, civil partner or your cohabiting partner (provided your relationship met certain conditions at death).
Protection In Case of Illness
Pension if you become too ill to work.
Flexibility
Flexibility to draw your benefits between 55 and 75.
Early Retirement in Case of Redundancy
Early retirement if you’re age 55 or over and made redundant.
Tax Relief
Tax relief on your contributions.
Pay Extra for More Benefits
Schemes to help you get even bigger benefits by paying extra.
Have you decided to opt out of the LGPS?
If you have decided to opt out of the LGPS, the first step is to complete the opt out form. You can find the form here.
Where do I send my completed opt out form?
Once you have fully completed your form, you must return it to your employer’s Payroll Section or Human Resources Department, as they are responsible for stopping pension deductions from your salary.
What happens next?
Once your employer has received your opt out form, they will stop deducting contributions from your next salary payment. They will then notify us of your decision to opt out of the pension scheme and we will process your benefits accordingly.
- If you opt out of the LGPS before completing three months’ membership, you will be treated as never having been a member in the scheme and your employer will refund your pension contributions.
- If you opt out of the LGPS with more than three months’ but less than two years’ membership and you do not already have a deferred benefit or pension in payment from the LGPS in England or Wales, you will normally be eligible for a refund of your contributions, which would be processed by us.
- If you already hold a deferred benefit or you are in receipt of a pension, you will be classed as satisfying the two year vesting period, therefore you will only be entitled to deferred pension benefits. This includes any previous membership you have with the LGPS.
Important things to remember
If you stay opted out of the pension scheme, your employer will normally automatically put you back into the LGPS approximately every three years from their automatic enrolment staging date to comply with the provisions of the Pensions Act 2008. You will need to opt out again within 3 months to ensure you are guaranteed a refund of your pension contributions.
Link to electronic opt-out form
Electronic Opt Out Form – LCC/LGPS Members Only (Please note: this form can only be used by members employed by Lancashire County Council
Transferring out
If you have left the Local Government Pension Scheme after paying into the scheme for at least 3 months you may be able to transfer your pension benefits to different pension scheme
To be able to transfer out you:
- must not be paying into the LGPS with any employer/fund
- must not be in receipt of a LGPS pension (other than a spouse’s, civil partner or cohabiting partner’s pension, or a pension obtained from a pension credit following a divorce or dissolution of a marriage or civil partnership)
- must not be retiring immediately due to redundancy, business efficiency or ill health reasons
- must be more than 12 months away from normal pension age (the age that you can take your pension and any lump sum in full) or before any guaranteed minimum pension (GMP) you are entitled to is payable (if you have a GMP this is payable at age 60 for women and age 65 for men)
- must be transferring your benefits to an Her Majesty’s Revenue and Customs (HMRC) registered pension scheme
If you have more than one pension record in the LGPS in England and Wales (in the same or different LGPS funds), then you will need to transfer all of them to the new scheme.
A pension credit awarded following a pension sharing order from a divorce or dissolution of a marriage or partnership can be transferred independently of your main scheme benefits.
We have to complete due diligence checks before completing the transfer process. This can sometimes take weeks especially confirmation from HMRC that the scheme is approved.
If the transfer is to an overseas pension scheme we require additional documentation and checks.
Further details on transfers out can be found on the link below including how to protect yourself against pension scams https://lgpsmember.org/tol/thinking-leaving-tvout.php