You can leave the LGPS at any time once you are a member by giving your employer notice in writing. You might, however, want to take independent financial advice before making the final decision to opt-out. And don’t forget you can, as an alternative, opt for 50/50 which allows you to remain in the scheme, building up valuable pension rights, but pay half your normal contributions for half your normal pension.
If you opt-out before completing 3 months membership you will be treated as never having been a member and your employer will refund to you, through your pay, any contributions you have paid during that time.
If you opt-out with 3 or more months’ membership but less than 2 years your benefits will become deferred. You can still take a refund of your contributions (less any statutory deductions) or transfer out your pension to another scheme.
If you opt-out after 2 years you will have deferred benefits in the scheme which can, if you want, be transferred out to another scheme.
If you opt-out you can opt back into the scheme at any time before the age of 75, provided you are still eligible to join the scheme. However, if you opt-out with the right to a deferred benefit you may not be able to join up your benefits should you re-join the LGPS at a later date.
If you opt-out of the LGPS and your employer is required to comply with the automatic enrolment provisions under the Pensions Act 2008, your employer may automatically enrol you into the LGPS at certain times. Your employer must notify you if this happens. You would then have the right to opt-out of the LGPS.
The benefit you have built up will be held in the Scheme. These benefits are often known as your deferred benefit.
Your deferred benefit is calculated as follows:
1/49 of your pensionable pay for that year (or 1/98 of your pensionable pay if you in the 50/50 Scheme).
1/60 of your final pensionable pay for each year (if you have any period of part-time service your final pensionable pay will be the full-time equivalent).
1/80 of your final pensionable pay for each year (if you have any period of part-time service your final pensionable pay will be the full-time equivalent). In addition, you will receive a tax free lump sum equal to 3 times your pension in relation to service prior to 1 April 2008.
You may have the option to increase your tax free lump sum by exchanging some of your pension built up after 1 April 2008.