Leaving your job before retirement
This page explains what happens to your LGPS benefits on leaving your job before retirement if you pay into the LGPS on or after 1 April 2014.
If you leave your job before retirement and have met the 2 years vesting period
You will have built up an entitlement to a pension.
You will have two options in relation to that pension entitlement:
- you can choose to keep your benefits in the LGPS. These are known as deferred benefits and will increase every year in line with the cost of living
- alternatively, you may be able to transfer your deferred benefits to another pension arrangement.
If you leave your job before retirement and have not met the 2 years vesting period
You will have three options:
- you will normally be able to claim a refund of your contributions, less a deduction for tax and the cost, if any, of buying you back into the state second pension (S2P) in respect of your membership up to 5 April 2016 when the LGPS was contracted out of S2P. Interest is paid if the refund is not made within one year of leaving but no refund can be made if you re-join the LGPS in England or Wales within a month and a day of leaving, or re-join before the refund has been paid.
- you may be able to transfer your benefits to a new pension arrangement (providing you have been a member of the LGPS for at least 3 months).
- you can delay your decision until you either re-join the LGPS, transfer your benefits to a new pension arrangement, or want to take a refund of contributions. Where you delay your decision you will have what is known as a deferred refund pension account.
Please note: the account can only be held in the fund for a maximum of 5 years or until age 75, whichever is earlier. If you have not transferred your benefits to a new pension arrangement or re-joined the LGPS by that time a refund of contributions will automatically be payable to you.
What if I have two or more LGPS jobs and leave some but not all of them?
If you have two or more jobs in which you pay into the LGPS at the same time and you leave one (or more) but not all of them, and you are entitled to deferred benefits from the job (or jobs) you have left, your deferred benefits from the job that has ended are automatically transferred to the active pension account for the job you are continuing in, unless you elect to keep them separate.
If you wish to keep your deferred benefits separate you must elect to do so within 12 months of re-joining the LGPS, unless your employer allows you longer. This in an employer discretion and you can ask your employer what their policy is on this matter.
If you are not entitled to deferred benefits from the job (or jobs) you have left, you cannot have a refund of your contributions and you must transfer your benefits to the pension account for the job you are continuing in.
Additionally, if you have membership built up before 1 April 2014 which you aggregate with the membership in the job you are continuing in, then this membership is adjusted to reflect any difference in the whole-time rates of pay between the jobs as follows:
Membership in the job you have left x whole-time rate of pay in the job that has ceased ÷ whole-time rate of pay in the job that is continuing.
What happens if my job is transferred to a private contractor?
If your job is transferred to a private contractor, the contractor will normally be required to provide you with continued access to the LGPS or to offer you a pension scheme that is broadly equivalent to the LGPS.
The contractor may become an admission body in the LGPS and this would allow you to stay in the LGPS so long as you continue working on the delivery of the contracted out service. If the contractor becomes an admission body your LGPS benefits prior to the transfer of your job to the contractor can be joined with your post transfer pension account.
Alternatively, the contractor may be able to offer you a broadly comparable scheme. This does not mean that the new scheme must mirror the benefits of the LGPS, but the value of the package offered by the new scheme must be broadly equivalent to the LGPS.
If you are offered a broadly comparable scheme you would have the same options available to you regarding your accrued LGPS benefits as anyone else leaving the LGPS before retirement.
Early payment of deferred benefits at your request
You can choose to draw your deferred benefits at any time between the ages of 55 and 75.
If you choose to draw your deferred benefits before your normal pension age, your benefits will normally be reduced to take account of their early payment and the fact that your pension will be paid for longer. How much your deferred benefits are reduced by depends on how early you draw them.
The reduction is calculated in accordance with guidance issued by the government from time to time. The reduction is based on the length of time (in years and days) that you retire early - i.e. the period between the date your benefits are paid and your normal pension age. The earlier you retire, the greater the reduction.
The early reduction factors can be found on the early retirement page.
Early payment of deferred benefits due to permanent ill health
The second method of obtaining early payment of your deferred benefits is on the grounds of permanent ill health.
You can apply to your former employer for payment of your deferred benefits at any age, without reduction if, because of your health:
- you would be permanently incapable of the job you were working in when you left the LGPS
- you are unlikely to be capable of undertaking any gainful employment within 3 years of applying for the benefit, or by your normal pension age, whichever is the earlier.
If you do not take early payment of deferred benefits, they will be paid from normal pension age unless you opt to delay payment beyond that age.
If you draw your deferred benefits after normal pension age they will be paid at an increased rate. Deferred benefits must be paid before age 75.