Membership of the Local Government Pension Scheme (LGPS) is automatic in the majority of cases, but it is not compulsory for you to remain in the Scheme. As a member you can cancel your membership at any time by opting out.
If you are thinking of opting out you might want to first consider an alternative option which is to elect to move to the 50/50 section of the Scheme. The 50/50 section allows you to pay half your normal contributions in return for half your normal pension build up. Further details of the 50/50 section can be found here – 50/50 Scheme.
Points to Consider Before Opting Out
If you are thinking of opting out you really need to consider that the Local Government Pension Scheme is one of the best and most highly valued of occupational pension schemes. Being a member means you can enjoy the benefit of a complete range of secure benefits.
- Index linked pensions
- Tax free lump sum
- Death Grants
- Survivor’s Benefits
- Childrens’ Pensions
- Ill Health Pensions
- Early retirement options
- Redundancy benefits paid early if over age 55
- Tax relief on contributions and additional contributions
Facts about the LGPS:
- Your employer also pays contributions into the Scheme
- Death cover from the day you become a member
- There is no medical requirement
- The option to increase your tax free lump sum
- No hidden fees or charges
- No investment risk. Your benefits are guaranteed in law
Your employer contributes to the Scheme on your behalf, usually at a higher rate than you do. If you choose to opt out of the LGPS you are giving up your employer’s contribution too.
When considering the benefits of being a contributing member, you’ll see that by opting out you can lose a lot more in the long term than you might gain in the short term.
Cancelling Your Membership
If you decide that you no longer wish to be a member of the LGPS and want to opt out, you can download the opt out form here. When you have completed it you must send it straight to your employer who will arrange to cancel your membership.
Claiming a Refund of Contributions
If you have less than two years membership in the Scheme, you are entitled to receive a refund of the contributions you have paid, if you have less than three months membership this will be via your pay, over three months membership will be paid via the Cheshire Pension Fund. Only your contributions are refundable, those paid by your employer are not. If you have any previous LGPS membership (as a deferred benefit or a pension in payment) or you have transferred any other pension rights into the LGPS, a refund is not permissible. You may notice that once you stop paying pension contributions that your tax increase. This is because you receive tax relief on your contributions.
If you have multiple roles. please be aware that you will need to opt-out of all roles and have under two years of service to be eligible for a refund. You are unable to have a partial refund if paying into the scheme on another record.
Opting Out – More Than Two Years Membership
Members who opt out of LGPS and have more than two years Scheme membership are not entitled to receive a refund of contributions. Instead they are entitled to deferred benefits in the Scheme. These remain deferred until retirement or they are transferred to another pension scheme.
Deferred benefits can be paid at age 60, but may be subject to an early retirement reduction. Should you wish to leave the Pension Scheme an opt out form can be obtained from the Fund or downloaded from the link below.