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 deferred factsheet 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.
50/50 Contribution Flexibility Form
Benefits of being in the LGPS
- A guaranteed index-linked pension, payable for life, based on your pay and how long you’re a member.
- You can take a tax free lump sum when you retire.
- Lump-sum death grant of three times your pay if you die, paid to the people you choose.
- Pension for your husband, wife, civil partner or your cohabiting partner (provided your relationship met certain conditions at death)
- Pension if you become too ill to work.
- Flexibility to draw your benefits between 55 and 75.
- Early retirement if you're age 55 or over and made redundant.
- Tax relief on your contributions.
- 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 towards the bottom of this web page.
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.