Membership of the Local Government Pension Scheme (LGPS) is contractual for most members. However, it is not compulsory to be in the pension scheme and you can choose to opt out at any time.
If you are thinking of opting out you might first want to consider an alternative option, which is to move to the 50/50 section of the Scheme. In the 50/50 section, you pay half your normal contributions in return for half your normal pension build-up. Find out how you can pay less in the 50/50 section.
Whatever your reasons for considering opting out of the scheme:
- you must 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 making your decision, you should also consider that:
- your employer meets a large part of the cost of providing the excellent range of secure benefits offered by the LGPS
- the LGPS is a valuable and important part of your employment package
- in most cases, you will pay more tax if you opt out of the LGPS. A basic rate taxpayer paying pension contributions of £100 a month will pay £20 more tax every month if they opt out
- if you opt out of the LGPS in an employment with less than two years’ membership, you will not be entitled to any scheme benefits.
If you are thinking of leaving the main pension scheme and opting out please note you will lose your entitlement to benefits such as a lump sum Death in Service payment and ill health Retirement unless you elect to join the 50/50 section.
Will I get a refund?
If you opt out of the LGPS before completing three months’ membership, you will be treated as never having been a member. Your employer will refund any contributions you have paid through your pay.
If you opt out of the LGPS with three or more months’ membership and before completing the full two years scheme membership, you can usually take a refund of your contributions (less an adjustment for tax) or transfer out your pension to another scheme.
If you opt out of the LGPS after completing a full two years within the scheme, you will have deferred benefits in the Scheme. You will generally have the same options as anyone leaving their job before retirement. However, you cannot take your deferred benefits unless you have left your job. If you re-join the Scheme, you will not be permitted to join your opted out deferred benefit with the pension account that will be created when you re-join the Scheme. Instead, you will have two separate sets of pension benefits.
Can I re-join the pension scheme at a later date?
If you opt out, you can opt back into the Scheme at any time before age 75, provided you are eligible to join the Scheme.
To make an application to re-join the LGPS main section download the LGPS 10B - Election to re-join the LGPS main section after previously opting out form (PDF, 631.71KB) and return it to your employer, who should then action this from the start of the next pay period. There is no limit to the number of times you can opt in and out of the scheme.
If you stay opted out, your employer will normally automatically enrol you back into the LGPS approximately every three years under the rules of re-enrolment. They'll do this from the date they have to comply with the automatic enrolment provisions, as long as you are an eligible jobholder at that time. An eligible jobholder is a worker who is aged at least 22 and is under State Pension Age and who earns more than £10,000 a year.
Your employer can choose not to automatically enrol you if:
- you had opted out of the LGPS less than 12 months before the date you would have been automatically enrolled in the job
- you or your employer gives notice to end your employment before or shortly after the automatic enrolment date
- your employer has reasonable grounds to believe that, on what would have been the date they automatically enrolled you, you hold Primary Protection, Enhanced Protection, Fixed Protection, Fixed Protection 2014, Individual Protection 2014, Fixed Protection 2016 or Individual Protection 2016.
Apply to opt-out of the pension scheme
If, having considered the 50/50 option, you still decide the LGPS is not for you, you can leave the LGPS at any time on or after your first day of eligible employment by completing an LGPS 04 - Opting Out form (PDF, 705.05KB).
Your employer is not allowed to provide you with an opt out form. You should consider independent financial advice before making the final decision to opt out.