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Preserved/deferred scheme members

Preserved/deferred scheme members

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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 be adjusted every year in line with the cost of living, or
  • 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:

  1. 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). Interest is paid if the refund is not made within one year of leaving but no refund can be made if you rejoin the scheme in England or Wales within a month and a day of leaving or rejoin before the refund has been paid.
  2. 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).
  3. 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, however, that the account can only be held in your Pension 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 rejoined the LGPS by that time a refund of contributions will automatically be payable to you.

If you have not met the 2 years vesting period when you leave but joined before 1 April 2014 and you have 3 or more months’ membership you will have an entitlement to a deferred benefit instead of a refund (but you can opt within 6 months of leaving to receive a refund if you wish).

Please contact us to confirm what type of benefits we hold for you.

Deferred benefits  

If you defer your benefits the amount held in your active pension account up to your date of leaving is transferred to a deferred pension account and you then have what are known as deferred benefits. The value of the pension in your deferred pension account is held in the LGPS for you until either you decide to transfer the value to another pension scheme, or the deferred benefits are due to be paid.

Your personal deferred benefits package consists of an annual pension, payable throughout your retirement, with an option on retirement to exchange some pension for a one off tax-free lump sum.  It also includes life cover and financial protection for your family. 

Your deferred benefits are calculated as follows: 

  • Your deferred pension in respect of your membership of the scheme after 31 March 2014 is the value of the pension you have built up in your active pension account at the point of leaving. That amount of pension is transferred from your active pension account to your deferred pension account.

    When you draw your deferred benefits you will be given the option to exchange some of your annual pension for a one off tax-free lump sum. You receive £12 lump sum for each £1 of annual pension given up. You can take up to 25% of the capital value of your pension benefits as a lump sum. 
  • The part of your deferred pension in respect of any membership of the scheme you have between 1 April 2008 and 31 March 2014 is calculated by dividing any period of membership you have falling between those dates by 60 and multiplying the resulting figure by your final pay on leaving.

    When you draw your deferred benefits you will be given the option to exchange some of your annual pension for a one off tax-free lump sum. You receive £12 lump sum for each £1 of annual pension given up. You can take up to 25% of the capital value of your pension benefits as a lump sum. 
  • The part of your deferred pension in respect of any membership of the scheme you have between before 1 April 2008 is calculated by dividing any period of membership you have falling before that date by 80 and multiplying the resulting figure by your final pay on leaving.

    In addition you will be entitled to an automatic tax-free lump sum of three times your pension for membership before 1 April 2008. You can also exchange part of the pre April 2008 pension for extra lump sum as described above. 

If you have deferred benefits, we will provide you with details of the value of your deferred benefits on leaving and an annual statement of your deferred benefits each year thereafter, so you can see how their value increases every year.

Please contact us in writing with any change(s) of address to ensure you receive your annual statements and your benefits, when they are due.

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