LGPS Opting out of the LGPS in England and Wales

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1 LGPS 2014 The Local Government Pension Scheme Opting out of the LGPS in England and Wales The Local Government Pension Scheme (LGPS) allows you to save while you are working in order to enjoy a pension once you retire. It is one of the best occupational pension schemes in the UK. What s more, the LGPS is provided by your employer who meets part of the cost of providing the excellent range of secure benefits, so it s an extremely valuable and important part of your employment package. You might be thinking of opting out of the LGPS for a variety of reasons. Whatever the reason, it s worth taking time to look at the benefits you could be giving up. A brief summary of these is given overleaf, and is also included in the Declaration section of the Opt Out form. Opting out won t save you as much in take home pay as you may think. In most cases, you will pay more tax. A basic rate tax payer paying pension contributions of 100 a month will pay 20 more tax if they opt out. You can find out how much it is costing you after tax relief by entering your relevant information on the Contributions Calculator on the web site To access this calculator, click on the LGPS 2014 tab on the home page, and then on How Much Does It Cost from the list shown on the left hand side of the screen.

2 Next click on the Contributions Calculator button and then on the following: From there, click on the red button Open the Calculator By completing the relevant information, the true cost to you will be shown in the column on the right hand of then screen for question 4, choose Main You should give this matter careful consideration before making a final decision regarding opting out of the pension scheme. You may also wish to take financial advice before making your decision. If you are opting out of the LGPS due to advice you have received you should ask for this advice in writing. Your employer cannot ask you or force you to opt out. If you are asked or forced to opt out you should inform The Pensions Regulator - see Equally, no one can force you to remain a member of the scheme but, if you choose not to be a member, you should understand the implications both for you and your dependants.

3 How to opt out of the LGPS You can obtain an Opt Out form from the pension website. From the Home page, click on your boroughs tab, and then on the word Forms which will then show a list of all forms held. The completed form should be forwarded in accordance with the instructions given on the form. Please note that your employer is unable by law to give you an Opt Out form in accordance with legislation around Automatic Enrolment but can give you a 50/50 form, also available on the pension website An alternative to opting out from the scheme completely As an alternative to opting out of the scheme entirely, you may wish to pay into the 50/50 section instead of the main section. This allows you to pay half the contribution of being in the main section of the scheme, but you only receive half the pension. You will still receive tax relief on the contributions you pay. You can use the same calculator as mentioned earlier to see how much membership would cost you in the 50/50 section but choose 50/50 for question 4. More information on this option is given on the fact sheet called The 50/50 Section If you do not have access to the internet, you can contact your pension team for a form. The contact details are given on the website. What happens to the contributions you have paid, if you opt out of the scheme? If you opt out of the pension scheme within 2 years of joining, in most cases, you will be entitled to a refund of those contributions. The exceptions for receiving a refund are: You are contributing to the scheme in another job with either your current or a different employer You have a deferred benefit in the scheme with either your current or a different employer You are in receipt of a LGPS pension - but not a dependants pension - with either your current or a different employer You are over state retirement age You have transferred previous pension rights into the LGPS If you opt out within 3 months of joining the LGPS, and none of the above applies to you, your contributions will normally be refunded by your employer through the payroll. If opting out after three months but before you have been in the scheme for 2 years, none of the above points apply to you and you request a refund, the Pension team will make the refund to you. Please note: refunds outside of 3 months membership are subject to a 20% scheme tax deduction even if you do not pay income tax, as well as an amount to restore your rights in the State Second Pension Scheme If you have been a member of the scheme for more than 2 years when you opt out of the scheme you are not entitled to a refund of your contributions, but will have a deferred benefit that is payable upon your retirement. You will then have the right to transfer your deferred benefit out to another occupational pension scheme or a personal pension plan. More

4 information on your rights will be forwarded to you at the time you are notified of the level of your deferred benefit. Re-joining the pension scheme You can re-join the pension scheme at any time by completing a Joiners Option form, obtainable from the pension website From the Home page, click on your boroughs tab, and then on the word Forms which will then show a list of all forms held. You need to be aware that anyone opting out of the scheme from 11 April 2015 onwards, and who has a deferred benefit from the membership they have opted out from, will not be able to amalgamate the 2 periods of membership when they opt back in to the scheme. The 2 sets of membership will have retirement benefits calculated separately at retirement and may therefore have different Normal Retirement Dates which can affect any reductions to benefits at that time, if deemed to be taken early. Benefits you are giving up by opting out of the LGPS by opting out of the Local Government Pension Scheme (LGPS) you are giving up the opportunity to participate in the LGPS which would provide a guaranteed package of benefits which are backed by Pension Legislation including: * a secure pension payable for life that increases with the cost of living * tax free cash the option to exchange part of your pension for some tax-free cash at retirement * voluntary early retirement from age 55 (even though the scheme s normal pension age is now your state pension age) * serious ill-health cover if you have to retire due to a serious illness, you could receive immediate benefits based on an enhanced period of scheme membership * redundancy cover with the early payment of pension benefits if made redundant or retired on business efficiency grounds at age 55 or over * life cover with a lump sum of three times final pay if you die in service. For part time employees, this is three times the actual pensionable pay. * cover for your family upon your death including a survivor s pension for your husband, wife, civil partner or nominated cohabiting partner as well as children s pensions for eligible children. * pension contributions from your employer as a member of the LGPS, your employer pays towards your benefits package.. If you opt out of the LGPS your employer will normally automatically re-enroll you back into the scheme approximately three years from the date they have to comply with the automatic enrolment provisions of the Pensions Act 2008, and workplace pensions

5 reform if you meet the necessary criteria. You will, however, be entitled to opt out of membership of the scheme again, at that time. Your employer may decide not to re-enroll you if you opted out of the LGPS within the 12 months prior to the employer s cyclical re-enrollment date. More information on Automatic Enrolment is given in fact sheet - Automatic Enrolment and re-enrolment Disclaimer Please note: this leaflet is intended as a broad guide to your benefits in the local Government Pension Scheme. It does not seek to cater for every different circumstance and no decisions should be taken based on its contents. You are strongly advised to consult our website and/or contact us for more detailed and individual information before taking any action in relation to your pension. Nothing in this fact sheet overrides the regulations which govern the LGPS and which are subject to amendment from time to time. For access to April 2016 for you, for now, for the future