Transferring your benefits
If you leave the Scheme and you are entitled to a deferred benefit or a cash transfer sum (where you have completed more than 3 months but less than 2 years scheme membership), you can generally transfer the cash equivalent of your pension benefits into another pension arrangement or a new employer’s pension scheme. This may even be to an overseas pension scheme that meets HM Revenue and Customs conditions.
You cannot transfer your benefits if:
- you leave or elect to transfer within one year of your Normal Pension Age
- you are still paying into the LGPS in another employment
- you are receiving another LGPS pension
Your new pension provider will require a transfer value quotation which we will guarantee for three months (known as the ‘Guarantee Date’). Your new pension provider can then advise you of the additional benefits the transfer will buy in their scheme. You must confirm in writing that you’d like to proceed with the guaranteed transfer value within the three-month guaranteed period. If you opt to proceed, the normal time limit for payment of the guaranteed transfer value will be six months from the ‘Guarantee Date’. If payment is not made within this period the Fund will need to recalculate the value as at the actual date of payment and pay the recalculated value.
You may also be able to transfer out your Additional Voluntary Contributions (AVCs) to a different pension arrangement. The conditions for transferring an AVC are different from those set out above. You can transfer your AVC without transferring your main LGPS benefits.
If you leave the LGPS with a deferred benefit and later re-join the Scheme, your deferred benefit will normally automatically be transferred to the active pension account for your new job, unless you elect to keep it separate. If you wish to keep your deferred benefit separate, you must normally elect to do so within 12 months of re-joining the LGPS. Your employer may allow you longer to decide.
If you leave the LGPS and are entitled to a refund of contributions (usually because you have less than two years’ membership) and you do not take the refund, this is known as a deferred refund. If you re-join the LGPS, this deferred refund must be joined with your new active pension account.
Transferring your benefits to a defined contribution scheme
The Government introduced flexible benefits from 6 April 2015 to allow members of defined contribution schemes, who are over age 55, more freedom on how they take money from their pension pot.
The LGPS is not a defined contribution pension scheme, it is a defined benefit scheme. It is not directly affected by these changes. However, if you stop paying into the LGPS and you have 3 or more months' membership, then unless you are retiring with immediate effect due to redundancy, business efficiency or ill health, you will have the right to transfer your LGPS pension to a defined contribution scheme providing flexible benefits. You can only transfer your pension if you elect to transfer at least one year before your Normal Pension Age.
You will be required by law to take independent financial advice if the value of your pension benefits in the LGPS (excluding AVCs) is more than £30,000. You are not required to take independent financial advice if the value of your benefits is less than £30,000. However, transferring your pension rights is not an easy decision to make. We recommend you seek the help of an independent financial adviser before you transfer to make the right financial decision, for your final decision to transfer is irreversible.
There are four main options for members aged over 55, who are in a defined contribution scheme which provides flexible benefits:
- purchasing an annuity
- flexi-access drawdown
- taking a number of cash sums at different stages
- taking the whole pot as cash in one go
Getting advice
Transferring your pension rights is not always an easy decision to make. You may wish to seek the help of an independent financial adviser before you decide to transfer your deferred benefits, especially to a personal pension or self-invested personal pension, for you will be bearing the investment risk, which could significantly affect your future pension benefits.
If you are considering whether to transfer benefits, make sure you have full information about the two pension arrangements. Request details of what your benefits are worth in the LGPS and details of what your benefits would be worth in the new pension scheme.