Membership

If you want to transfer your pension benefits out of the LGPS, please bear in mind the following:

• Your transfer payment will include any extra LGPS pension you’ve bought for yourself or for a dependant – that is, any Additional Pension Contributions, Additional Regular Contributions, added years or pre 1988 membership for a cohabiting partner’s pension.
• If you have paid Additional Voluntary Contributions (AVCs), you don’t have to transfer these with your main pension.
• After you take a full transfer, there will be no more benefits payable from the LGPS to you or your dependants.
• If you hold more than one set of deferred benefits in the LGPS in England and Wales, you have to transfer them all in one go, or leave them all in the LGPS. You can’t transfer them to different arrangements, at different times.
• You cannot take a transfer if:
  • you ask to do so less than one year away from Normal Pension Age;
  • you are still making contributions to the LGPS; or
  • you are already receiving an LGPS pension.

If you transfer your LGPS benefits to another public service pension scheme, the Club transfer rules may apply. This usually means your benefits in the new scheme would be broadly the same as the benefits you had in the LGPS. For the rules to apply, you must:

• join the new public service pension scheme within five years of leaving the LGPS, and
• ask to transfer in your LGPS benefits within a year of joining the new pension scheme.

How transfers work

Government rules are in place to protect scheme members planning to transfer their pension.

In some circumstances, you will need to take independent financial advice before you transfer out of the LGPS. If you transfer to a defined contribution scheme, you would lose the guarantees that your LGPS has. A qualified financial adviser will help you understand how transferring your pension out of the LGPS could affect your income in later life.

Here are the general steps for taking a transfer. You won’t need to take them all if you are transferring to a ‘safe’ scheme like another public service pension scheme.

• First tell your new pension arrangement you are considering transferring your LGPS pension. You will need to give them your authority to contact us, along with our Fund contact details.
• We will supply a quotation of the ‘transfer value’ of your deferred benefits. The quotation will be guaranteed for three months – or, if you are coming up to a year before Normal Pension Age, possibly a shorter period. We’ll send the relevant forms to you and the new pension scheme for completion.
• Your new arrangement will tell you the benefits the transfer would buy in their scheme.
• If you decide to go ahead with the transfer, you must complete a written option form within the three-month guarantee period.
• We must check for any signs that the arrangement you want to transfer to is a scam. We may ask you for more information about it, and what prompted you to consider the transfer. Please answer our questions as soon as you can. We will stop the transfer if we don’t have enough detail, or we think you might be at risk. You may have to attend a Pension Safeguarding Guidance appointment with MoneyHelper.
• If we satisfy ourselves that the arrangement is legitimate, we will make the transfer payment, normally within six months of the guarantee period ending.

Transferring to a defined contribution plan

You are allowed to transfer your benefits out of the LGPS and into a DC plan if you want to take advantage of the flexible options.

However, it is worth thinking carefully before you do. You would be leaving the security of a defined benefit scheme for a DC plan where you carry more personal risk and you don’t know the exact benefits you will receive.

For this reason, if your benefits in a DB scheme – like the LGPS – are worth over £30,000, by law, you must get independent financial advice before moving them. You need to give us evidence in writing that you’ve received this advice before we will pay out the transfer.

To find an adviser, visit register.fca.org.uk. Bear in mind that you will have to arrange and pay for any advice you receive.

Pension Wise is a free, impartial service that offers guidance to consumers. It can help if you are:

• Aged 50 or over;
• Have a personal or workplace pension; or
• Want to make sense of your options.

You can book a free appointment online at www.pensionwise.gov.uk.

Freedom and choice

In April 2015, the Government made significant changes to the way people can take their retirement income. However, the changes mainly apply to defined contribution (DC) pension schemes, where members build up a pot of money with contributions from themselves and their employer. They choose how to invest the pot, then use the amount they have built up to buy benefits when they retire.

Members of DC schemes no longer have to buy a guaranteed income for life (also known as an annuity) with their pension money. They now have three options:

• Annuity – a regular income, in the same way as before;
• Cash - either in a single lump sum, or in stages; or
• Drawdown – taking income directly from their savings as and when they want to, and keep investing the rest.

They can mix the options if they want to – for example, draw down to start with, then buy an annuity later on with the savings they have left.

If they choose cash, the first 25% is tax-free and rest is taxed in the same way as any other income, such as a salary.

The LGPS is a defined benefit (DB) pension scheme, which means your benefits don’t depend on how much you pay in, or how well your investments perform. Instead your LGPS pension is based on how long you've been a member and how much you have earned. This means your benefits are secure and predictable.

Remember that in the LGPS, you can still swap some of your pension for cash. You can usually take a tax-free lump sum up to 25% of the total value of all your LGPS benefits.