Opting out of your pension
Paying into a pension can feel like a thankless task when money’s tight and you're looking to boost your income. But before you opt out, it’s worth taking the time to understand your options.
10 good reasons to stay
A death in service lump sum for your loved ones
As part of your pension, a financial lump sum (death grant), worth at least three times your annual salary, is payable in the event of your death. This acts as a kind of life insurance for your loved ones when you die.
A tax-free lump sum when you retire
As well as having a guaranteed annual income when you retire, you have the option of converting up to 25% of your pension’s value into a tax-free lump sum – giving you more options for your retirement.
Early retirement
Rather than waiting until your normal pension age, you have the option taking your pension early. Although your benefits would be reduced, it gives you more flexibility on your future retirement plans.
A full pension if you are too ill to work
If you are too ill to work, you may be able to retire early and still receive your full pension (as long as you meet the relevant criteria).
The option of early retirement if you are made redundant
If you are part of a local government scheme and made redundant over the age of 55, you are entitled to receive your full pension without any reduced benefits (not applicable to police and firefighter schemes).
A pension for your partner (or child) in the event of your death
Your husband, wife, civil partner or cohabiting partner (and in some cases child) receives a pension in the event of your death (providing the relationship meets certain conditions at death).
50/50 option
Last but not least, if you’re a member of an LGPS scheme it doesn’t have to be all or nothing. By transferring to the 50/50 scheme, you get to reduce your contributions by half, for half the retirement income. Plus, you still get to keep all of the benefits above.
Before you go… you might find these bite-sized videos useful
What is the 50 / 50 option?
More than a great pension…
When you’ve gotta go, you’ve gotta go…
If you’ve made up your mind and definitely want to leave, we won’t stand in your way. Just follow these three simple steps.
1. Complete the opt out form
You can download a paper version here or if you work for Lancashire County Council you complete the online version of the form.
2. Return the completed form to your employer
Paper forms should be returned to your Payroll or Human Resources Department.
3. Your employer will remove you from the scheme
After receiving your form, your employer will cancel your payroll deductions and notify us, so that we can process your benefits.
What happens next?
Depending on how long you’ve been a member you can either cash in your contributions or defer your benefits until you retire.
If you’ve been a member of the pension scheme for less than three months, your employer refunds your pension contributions in full and you are treated as though you’ve never been a member.
If you’ve been a member of a police or local government pension scheme for between three months and two years, you will receive a full refund. We arrange the refund once we get confirmation from your employer – unless you’ve been a member previously, in which case you may be able to defer your benefits.
If you’ve been a member of a firefighter scheme for more than three months, your benefits will be deferred.
If you have been a member of your scheme for over two years, you are entitled to defer your pension until you retire, or you can choose to transfer your pension to a new provider.
Rules are rules
To comply with the 2008 Pensions Act, your employer has to re-enrol you into the scheme every three years. You will be notified when this happens and given the opportunity to opt out again, which you will need to do within 3 months to ensure a guaranteed refund.
While we’d hate to see you go, we understand there may come a time when you want to transfer your pension benefits to another scheme. Before you make any plans, you just need to be aware of the rules.
Transfer rules
- You must have been paying into your pension for at least 3 months.
- You must be at least 12 months away from Normal Pension Age or a Guaranteed Minimum Pension.
- You must be transferring your benefits to an HMRC registered pension scheme (and in the case of Police or Fire schemes, one that does not provide the option of Flexible benefits).
- You must not be paying into the LGPS, Police or Fire scheme with any other employer. If you have more than one pension in these schemes, you will need to transfer all of them to your new scheme.
- You must not be in receipt of an LGPS, Police or Fire pension (other than a ‘survivor’s pension’ following the death of a partner or a ‘pension credit’ following a divorce or dissolution of a civil partnership).
- You must not be retiring immediately.
How long will it take?
Every case is different, but the transfer process can often take several months because of due diligence checks and HMRC confirmation. Whatever happens, we’ll keep you fully updated along the way.
Is the process the same for overseas transfers?
If you’re transferring to an overseas pension scheme, we are likely to require additional documentation and checks, so it may take a little longer. Again, we’ll keep you fully updated along the way.
Don’t take any chances
Please be aware that scammers do operate in these markets. You’ll find more information on how to avoid pension scams by clicking the following button.
