Leaving before retirement

Overview

You may leave your job before you want to take your pension. If you have met the the two year vesting period when you leave, you will have deferred benefits in the LGPS. If you have not met the vesting period, you could choose to take a refund of the pension contributions you have paid. You may be able to transfer the value of your LGPS pension to another pension arrangement after you leave.

Deferred benefits

If you leave your job before retirement and you meet the two year vesting period, you will have deferred benefits in the LGPS. See the page on How your pension is worked out to find out how your deferred benefits are calculated.

Your deferred pension will increase each April in line with the cost of living. A death grant will generally be paid if you die as a deferred member. Your partner and children may also receive dependants’ pensions. See the FAQs for information about what will be paid when you die.

Your deferred pension will be held in the LGPS until:

you choose to take your deferred pension. You can generally take your deferred pension at any time between age 55 and 75. You may be able to take it earlier if you are too ill to work. See the Taking your pension page for more information about your options when you take your deferred pension.
you transfer your deferred benefits to another pension arrangement. See the page on Transferring your pension to find out what you need to know about pension transfers.

Special rules apply if you have more than one job in the LGPS and if your job is moved to a private contractor. See the FAQs to find out more about what happens if either of these apply to you.

Leaving the LGPS and paying extra

In this section you can find out what happens to any extra contributions you have paid if you leave the LGPS with deferred benefits. Different rules apply depending on what type of extra contributions you have paid.

Additional Pension Contributions or Additional Regular Contributions

If you have bought extra LGPS pension by paying Additional Pension Contributions (APCs) or Additional Regular Contributions (ARCs), you will be credited with the extra pension you have paid for when you leave. The extra pension will increase the value of your deferred benefits.

If you re-join the LGPS and combine your deferred benefits with your new pension account, the extra pension will also transfer. You will not be able to continue with an ARC or APC contract in your new job. You will be able to start a new APC contract if you wish to.

If you transfer your LGPS pension to another pension arrangement, the extra pension will increase the transfer value your pension fund pays to the new scheme.

Added years

If you are buying extra years in the LGPS, you will be credited with the extra membership you have paid for when you leave. The extra membership will increase the value of your deferred benefits. It will also increase any transfer value paid to a different pension scheme.

If you re-join the LGPS in England or Wales, you can carry on buying added years as long as:

you re-join the LGPS within a year of leaving
you contact your new pension fund about this within three months of re-joining, and
you agree to pay extra contributions to cover any gap between leaving and re-joining the LGPS.

Contact your pension fund within three months of re-joining the LGPS if you want to carry on buying added years.

Additional Voluntary Contributions (AVCs)

You may have paid AVCs arranged through the LGPS. These are known as in-house AVCs. Your AVC fund will continue to be invested until it is paid out. You cannot pay in-house AVCs after leaving. This means that any life cover you have paid for through AVCs will stop.

You can:

Transfer your AVC to another pension arrangement. If you have more than one LGPS in-house AVC, you must transfer them all at the same time. You can transfer your AVC and leave your deferred pension account in the LGPS.
Take your AVC at the same time as you take your deferred LGPS pension. Find out how you can use your AVC when you retire on the Taking your pension and paying extra page.
Transfer your AVC to the AVC arrangement offered by your new pension fund if you re-join the LGPS. If you started paying AVCs after 31 March 2014 and you combine your deferred benefits with your new active pension account when you re-join the LGPS, you must transfer your AVC.

Cohabiting partner’s pension

You may have elected to pay additional contributions to buy extra cohabiting partner’s survivor pension. Your cohabiting partner’s survivor pension is usually based on your membership after 5 April 1988. If you paid extra contributions, the survivor pension will be based on your membership before that date as well. If you leave with deferred benefits, the part of your membership before 6 April 1988 that you have paid extra for will be included when your pension fund works out the survivor pension your cohabiting partner is entitled to.

Leaving without deferred benefits

You will not qualify for deferred benefits if you do not meet the two year vesting period. If you do not qualify for deferred benefits, you will generally have three options:

You can claim a refund of the pension contributions you have paid.
If you have been a member of the LGPS for more than three months, you may be able to transfer the cash value of the deferred refund to another pension arrangement. You will generally have to complete a transfer within a limited time after leaving. See the section on Transferring your pension to find out what you need to know about pension transfers.
You can delay your decision. You should bear in mind any time limit for completing a transfer out. You can delay your decision to take a refund for up to five years or until age 75 if that is earlier.

Refund of contributions

A refund of contributions will include:

any pension contributions you have paid
any Additional Pension Contributions or Additional Voluntary Contributions (AVCs) you have paid, except AVCs paid for life cover
any AVCs paid by your employer under a salary sacrifice scheme, and
any contributions you paid which were included in a transfer payment received by the LGPS.

Tax of 20 percent will be taken from the refund. The refund may also be adjusted if you paid National Insurance as a Scheme member before 6 April 2016. You paid National Insurance at a lower rate as an LGPS member before 6 April 2016. This adjustment will buy you back into the State Second Pension (S2P) for the period before that date.

You do not have to take your refund immediately. You can delay payment for up to five years after leaving the LGPS, or until age 75 if this is sooner. Your pension fund must pay the refund at that point.

If you are paid the refund more than a year after you left the Scheme, your pension fund will add interest. The interest rate is 1 percent above base rate on a daily basis, compounded with three monthly rests, from the date you left the Scheme to the date the refund is paid.

You cannot take a refund if:

you re-join the LGPS in England and Wales within a month and a day of leaving the Scheme
you re-join the LGPS before you have claimed a refund
you are paying into the LGPS in more than one job and you remain an LGPS member in the job that is continuing. See the FAQs for more information about what happens if you are paying into the LGPS in more than one job.

You will have an additional option if you first joined the LGPS before 1 April 2014 and you leave with between three months and two years membership. You will be able to to choose a refund or a deferred benefit. If you choose a refund, you must claim your refund within six months of leaving.

Local Government Pension Scheme