Transferring Your Benefits

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Points to consider when deciding whether or not to transfer LGPS benefits

Local Government Pension Scheme (LGPS) regulations 2008

Unless you specifically opt to transfer the benefits you have accrued with your previous local authority employer, or from a previous job, those benefits will remain as separate “deferred benefits” in your former local authority employer’s pension fund (if you are changing employers) or within the existing Pension Fund (if you are just changing jobs with the same employer).

You have 12 months from the date of changing jobs or employment to decide whether to combine benefits. If you do not make a decision within this time period, the benefits will remain as separate deferred benefits and you will not have a further opportunity to combine them unless your new employer allows you to.

If they are transferred, the benefits on retirement from your new job will be calculated by reference to the combined membership (ie former job[s] plus new job) and the pensionable pay earned in the final year of the new job (being the whole time equivalent pay if you are part time).

However, if the (whole time equivalent) salary/wage in your new job is less in “real terms” than the (whole time equivalent) salary/wage in your former job, taking inflation into account, and is not likely to equal or overtake it, it may be more beneficial to retain “deferred benefits”. To decide whether the (whole time equivalent) pay in the new job is, or is likely to be, greater in “real terms”, you will need to decide whether, by way of incremental progression, pay awards and promotions it currently exceeds, or will in future exceed your old rate of (whole time equivalent) pay plus inflation.

If you believe that the (whole time equivalent) pay in your new job is unlikely to exceed the (whole time equivalent) pay in your old job plus inflation and you decide not to transfer your accrued pension rights, then:

the benefits on retirement from the new job will be calculated by reference to your membership in the new job and the (whole time equivalent) pensionable pay earned in the final year of the new job, and
the “deferred benefits” in respect of your former job will, on payment at retirement age, be increased between the date of leaving the former job and the date of payment by pensions increase, linked to the Retail Price Index.

Other matters which you should take into account when making your decision on whether or not to transfer your accrued LGPS rights are listed overleaf.

Qualification for benefits in the new job

If you opt to transfer your accrued LGPS rights, the membership will count towards:

the 3 months of membership required to be entitled to ill health benefits
the 3 months of membership required to be entitled to deferred or retirement benefits (before age 65)
the 85 year rule, ie on retirement before age 65, benefits are paid with no actuarial reduction if your combined age (in whole years) and membership (in whole years) equals or exceeds 85 years, and
the “protected” 25 year rule, ie the rule which allows people who joined the LGPS prior to 1 April 1998 to retire on or after age 60 and before age 65 with unreduced benefits if they have 25 years membership in the Scheme.

However, if you decide to retain your “deferred benefits”, the “drawbacks” are that the membership will not count towards the 85 year rule.

Death Grant

If you retain your “deferred benefits”, and subsequently die in service on or after 1 April 2008, a lump sum death grant equal to:

three times your pay in your current job, PLUS
the amount of the deferred lump sum in respect of your deferred benefits will be paid if you left before 1 April 2008, or five times the deferred pension if you left on or after 1 April 2008

If you decide to combine your benefits rather than retain your “deferred benefits”, the death grant payable on death in service will only be:

three times your pay in your current job.

Persons who have elected to pay additional contributions to buy added years of membership (not part time buy back)

If you retain your “deferred benefits”, any existing election to pay additional contributions will cease at the date of leaving your former employment and you will be credited with the proportion purchased.

You would not be able to make a new election to purchase added years of service but you can buy additional pension in instalments.

Part time buy back

Regardless of whether or not you retain “deferred benefits”, any existing election to pay additional contributions in order to purchase previous part time service under the “part time buy back” provisions will cease as at the date of leaving your former employment. You will be credited with the proportion of service purchased up to your date of leaving. You will not be able to make a fresh election to purchase any balance outstanding. You should be given the opportunity to pay the remainder of the sum due, so you can count the whole of the period covered by your original election.

National Insurance Modification

Prior to 1 April 1980 the amount of contributions that Scheme members paid into the LGPS and the benefits they received from the Scheme on attaining State Pension Age were reduced by a small amount known as National Insurance Modification. A “deferred benefit” awarded in respect of membership, which ceased prior to 1 April 1998, and which included some membership prior to 1 April 1980, will be subject to the National Insurance Modification at State Pension Age.

And a final reminder ………………..

You have 12 months from the date of changing jobs to decide whether to combine benefits. If you do not make a decision within this time period, the benefits will remain as separate deferred benefits and you will not have a further opportunity to combine them unless your new employer allows you to.

www.wiltshirepensionfund.org.uk

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