If you leave, or opt out of the LGPS before retirement, there are several options available to you.
If you have less than 3 months total membership and no previous LGPS pension rights, you can:-
- Receive a refund of your contributions, less any deductions for tax and the cost of re-instating you in the State Second Pension (S2P).
- Transfer your benefits into another pension scheme, other than to an LGPS fund.
- Leave your contributions with the Gwynedd Pension Fund. If you re-join the LGPS as a Councillor with the Gwynedd Pension Fund, you can combine both periods together.
If you have more than 3 months total membership, you can:
- Leave your benefits within the Gwynedd Pension Fund until you are entitled to retire. This is known as a deferred benefit: Your pension entitlements will be calculated at the date of leaving but payment will be deferred until normal retirement age.
- Transfer your benefits into another pension scheme, other than to an LGPS fund.
- If you re-join the LGPS as a Councillor with the Gwynedd Pension Fund, you can combine both periods together.
For more information on these options please see below:
Refund of Contributions
As a councillor, if you wish to claim a refund of the contributions you have paid into the LGPS you must:
- Have less than 3 months membership, and
- No other LGPS pension rights
The amount refunded will normally be less than the total contributions you have paid because the tax relief you have received will be deducted from the refund at the rate of 20%.
The refund payment will not include the contributions paid by your employer. Please contact your employer if you wish to opt out of the scheme and claim a refund. Following the refund being paid you will have no entitlements to benefits under the LGPS.
Deferred Benefits
Upon leaving the LGPS prior to normal retirement age, your deferred pension benefits will be based on only two factors:
- Your total period of membership up to date of leaving
- Your career average pay.
Your pension entitlements will be:
- Pension = Career average pay x Membership ÷ 80
- Lump Sum = 3 x Above annual pension
Your deferred pension will increase each year in line with the cost of living.
Converting pension into lump sum
All councillors will have the option of converting a percentage of their pension into a tax free lump sum. For every £1 of pension that you give up, you will receive a lump sum payment of £12.
There are HMRC limits as to how much pension you are able to convert. Currently, the maximum amount of pension the can be commuted is 25% of the capital value of your pension benefits, calculated using the following formula:
- Capital value = [ (120 x Pension) + ( 10 x Lump sum) + ( AVC Fund (if any) ] ÷ 7
- Total maximum lump sum = Capital value x 25%
If you decide to commute a part of your pension to lump sum, this will not reduce any subsequent survivor’s benefits payable in the even of your death.
Claiming your deferred pension
Further information on when you can claim your deferred pension entitlements can be found under the When Can I Retire section of this website.
Transfer of Benefits
After you leave the Gwynedd Pension Fund as a Councillor with an entitlement to deferred benefits, you will have the option of transferring these benefits into a non LGPS pension provider, such as:
- An occupational scheme
- A personal pension plan
- A stakeholder pension
This may be to an overseas scheme or an arrangement that has been fully approved by Her Majesty’s Revenues and Customs (HMRC).
If you wish to investigate transferring your deferred benefits you should contact your new pension provider to find out if they are willing and able to accept a transfer from an LGPS Fund, and the procedure for doing so.
If they are willing, they will then write to us requesting a transfer value quotation and let you know what the benefits will be worth in their scheme.
It will be your responsibility to compare the benefits this transfer would provide with those you would receive as a deferred member of the Gwynedd Pension Fund. Transferring your pension rights is not always an easy decision to make and you may wish to seek the help of an independent financial advisor.
If you do decide to proceed, you will no longer have any pension rights within the Gwynedd Pension Fund.
The latest you can request to transfer your benefits out of the Gwynedd Pension Fund is one year before age 65.