Transferring your LGPS pension to another pension scheme
If you have left the LGPS and are joining another pension scheme, you may wish to consider transferring your LGPS benefits to it. You can even transfer your LGPS pension to an overseas pension scheme provided that it meets certain conditions set by HM Revenue and Customs.
You cannot transfer your benefits (other than AVCs) if you leave less than one year before your Normal Pension Age. An option to transfer (other than in respect of AVCs) must be made at least 12 months before your Normal Pension Age.
If a full transfer payment is made, you will not be entitled to any further benefits from the LGPS for yourself, your spouse, civil partner, eligible cohabiting partner or eligible children.
If you are thinking of transferring your pension benefits out of the LGPS you should be aware that scammers operate in these markets and are after your pension. Use the find out more buttons on the right hand side of this page to find out how to protect yourself against scammers.
Remember, you can choose to take payment of your benefits from age 55 in the LGPS. You can also choose to give up some of your pension to provide for a tax free lump sum. For more information on when you can take your benefits see the section when can you take your deferred pension?
What to consider?
If you are considering whether to transfer benefits, make sure you have full information about the two pension arrangements i.e. details of what your benefits are worth in the LGPS and details of what your benefits would be worth in the new pension scheme, if you transfer them. When you compare your options, don't forget that your LGPS benefits are guaranteed to increase in line with cost of living increases.
Transfers to public sector schemes usually give benefits that are broadly equivalent to those in the LGPS, under what are known as Club transfer rules provided you apply for the transfer within 12 months of joining your new pension scheme and have not had a break in membership of more than 5 years between leaving the LGPS and joining the new public service pension scheme.
However, transferring your pension rights is not always an easy decision to make and you may, therefore, wish to seek the help of an independent financial adviser before you make a decision. This is particularly important if you are considering transferring your deferred benefits to a personal pension plan, stakeholder pension scheme, buy-out insurance policy or to an employer's money purchase scheme, as you will be bearing all of the investment risk which could significantly affect your future pension benefits.
You can only transfer benefits from the LGPS if you have left the scheme and you have not already drawn benefits from the LGPS (either in your current employment or any earlier employment). Also, if you hold more than one deferred benefit in the LGPS in England and Wales (either in the same or separate LGPS pension funds), you will be required to transfer all or none of the benefits you hold. It is not possible to transfer one deferred benefit whilst retaining another deferred benefit in the LGPS.
Freedom and Choice - Flexible Benefits
Flexible benefits were introduced by the Government from 6 April 2015 to allow members of defined contribution schemes, who are over age 55, more freedom on how they take money from their pension pot.
The LGPS is not a defined contribution pension scheme (it is a defined benefit scheme) and as such, it is not directly affected by these changes. However, if you stop paying into the LGPS and you have three or more months' membership, then unless you are retiring with immediate effect due to redundancy, business efficiency or ill health, you will have the right to transfer your LGPS pension to a defined contribution scheme providing flexible benefits.
Please note that you will be required by law to take independent financial advice if the value of your pension benefits in the LGPS (excluding AVCs) is more than £30,000. You are not required to take independent financial advice if the value of your benefits is less than £30,000, however, transferring your pension rights is not always an easy decision to make and seeking the help of an independent financial adviser before you make a decision to transfer could help you in making an appropriate decision.
There are four main options for members who are in a defined contribution scheme which provides flexible benefits, including:
- to purchase an annuity (yearly pension) or scheme pension, if offered
- taking a number of cash sums at different stages
- taking the entire pot as cash in one go
- flexi-access drawdown
For more information about Freedom and Choice and transferring to a scheme providing flexible benefits use the find out more buttons on the right hand side of this page.