Opting - Out
We believe it is very important for members to fully understand the value of the benefits they would give up if they opted out of the pension scheme. Before we deal with opt-outs, have you considered the 50/50 option?
During your life there may be times when things are difficult financially and you are looking for ways to save money.
The LGPS now offers you the flexibility to stay in the Scheme and continue to accrue valuable pension benefits. You can choose to pay half of your normal contributions and accrue half of your normal pension. This is known as section 50/50 of the LGPS.
I'm considering opting out, what will I lose if I do?
Assured benefits
The scheme provides you with future income, independent of share prices and stock market fluctuations.
At low cost to you
Tax reduction on all your contributions.
Your employer pays in too
The plan is provided by your employer who pays most of the cost of your benefits in the LGPS. You can look forward to your retirement with the LGPS with:
Tax-free cash
You have the option when you draw your pension to exchange part of it for some tax-free cash.
Reassurance
Your family enjoys financial security, with life and pension insurance for your spouse, civil partner or eligible cohabiting partner and eligible children if you die in service. If you become seriously ill and have been in the fund for at least 2 years, you could get immediate sickness benefits.
Opters Out and Combine Benefits
If you became entitled to deferred benefits on or after 11 April 2015 after opting out of the Scheme then re-join the LGPS, you will not be able to aggregate (i.e. combine) the two membership periods.
Video – Life after work
Refunds
You can only have your contributions refunded if all the following criteria apply:
- you have less than 2 years of qualifying membership in the scheme (including service with another occupational pension scheme for which a transfer was paid into the LGPS)
- you have not transferred previous pension benefit rights into the LGPS that prevent a refund of contributions, e.g. a personal pension
- you have not rejoined the LGPS within one month and one day of leaving the employment to which the refund relates
- you have not rejoined the scheme before the refund has been paid
- you have not previously transferred any LGPS benefits overseas
- you do not have any other LGPS benefits in England or Wales, whether deferred, in payment as a pension, or active membership
If you receive a refund after failing to disclose other LGPS benefits, the payment of the refund will ‘cancel’ your entitlement to those benefits.
There are other less common restrictions relating to entitlement to a refund of pension contributions. We will let you know if any of these apply to your circumstances.
Deductions that may be made from refunds
Current legislation requires pension schemes to make certain deductions from contribution refunds relating to payments that must be made on your behalf:
- Contracted out of S2P / SERPS
When you were a member of the LGPS, you were contracted out of the State Second Pension (S2P), previously known as the State Earnings-Related Pension Scheme (SERPS). As a result, you paid National Insurance contributions at a lower rate and did not build up any benefits in S2P.
To reinstate your pension rights in S2P, you and your former employer must pay a premium. Your share, known as the Certified Amount, is deducted from your refund. - 20% tax deduction
Every refund is subject to a 20% tax deduction on the remaining balance after the state scheme premium has been deducted, whether or not you are a taxpayer.
The Fund must pay this tax to HM Revenue & Customs. This liability is passed on to the member; it is not Income Tax and cannot be reclaimed.
Claiming a refund
If you would like to apply for a refund, please contact us and we will send you the necessary form.
Deferred benefits
If you leave the scheme with two years’ membership or more, and before you are entitled to get you pension, the pension benefits you have built up will become deferred benefits. Your pension benefit is calculated at the date of leaving but payment is deferred until you decide to retire. Deferred benefits are increased each ear in line with the Consumer Price Index (CPI).
Having left the LGPS with a deferred benefit you can decide whether to:
- Retain your pension within the Gwynedd Pension Fund until you retire.
- Transfer your deferred pension to a new provider, such as your new employer’s scheme or a personal pension plan.
- Combine your previous membership with your new membership (if you are re-joining the LGPS).
Click here for more information on how we calculate your deferred benefits
Transfer Out
You can only transfer your LGPS pension if you have stopped paying into the Scheme, so if you are still paying into it you will need to opt out of the scheme first.
You cannot transfer a LGPS pension if you currently in receipt of a LGPS pension in your own right (excludes a spouse’s civil partner or cohabiting partner’s pension or a pension as a result of pension credit. If you have a LGPS pension being paid you cannot transfer any deferred benefits out of the LGPS.
Click here for more information on transferring your pension benefits out of the LGPS.