Do you know how valuable your LGPS pension is?
The benefits of being a member of the Local Government Pension Scheme (LGPS)
Do you know how valuable your Local Government Pension Scheme (LGPS) is, even before you retire?
You may decide that the LGPS is not right for you, especially at the current time when the cost of living is continually increasing. However, before you make a decision that could impact your income in later life, you may wish to seek independent financial advice. You should think carefully before you decide to opt out and consider what you will be giving up should you leave the LGPS.
The Local Government Pension Scheme offers a number of benefits which include:-
- a secure pension based on your pay, not the state of the financial markets when you retire
- the option to exchange part of your pension for tax free cash on retirement
- immediate life cover and a pension for your husband, wife, partner and/or children when you die
- an option to retire from 55 and receive benefits immediately, although if you voluntarily retire early, your pension is likely to be reduced for being paid early
- an option to flexibly retire from 55 with employer's consent
- immediate payment of pension benefits, without reduction, if you are made redundant or retired for business efficiency purposes after 55
- access to a pension, which could be enhanced, from any age if you should be retired on the grounds of permanent ill health
- the ability to boost your pension by paying more contributions, for which you receive tax relief
You may wish to join the 50/50 section of the LGPS instead of opting out altogether
The LGPS offers a 50/50 section of the LGPS, which allows members to pay half the normal contributions to build up pension at half the normal rate. You retain full life cover and ill health cover in the 50/50 section. Pensions payable to your husband, wife, partner and/or children in the event of death will also continue to accrue at the full rate. This flexibility may be useful in times of financial hardship, whilst still providing peace of mind for you and your family.
What happens when you make the decision to opt out of the LGPS?
If you decide to opt out, you may be entitled to a refund of your pension contributions. If you opt out:-
- within three months of joining the LGPS, your employer will arrange to refund your pension contributions through your pay.
- after 3 months but within two years of joining the LGPS, as long as you have no other LGPS pension rights elsewhere, you can claim a refund of your pension contributions. 20% tax will be deducted from your contribution refund.
- after more than two years of joining the LGPS, you will be entitled to deferred benefits. If you re-join the LGPS, you will not be able to join your two periods of Scheme membership together. You will have two separate sets of pension benefits in the LGPS.
If you do opt out of the LGPS, your employer is required to re-enrol you into the LGPS every three years on a set re-enrolment date.
You can decide at a later date to opt back in to the LGPS as long as you are still eligible to join, and you are under the age of 75.
You can find the opt out form, election to join the 50/50 section form and election to opt in to the Tyne and Wear Pension Fund on our website.
Further information can be found on the national LGPS website which you may find useful in making your decision.