Freedom and Choice

In the 2014 Budget the Chancellor announced that there would be changes in the way that savings held within defined contribution pension schemes; for example stakeholder or personal pensions could be taken. From 06 April 2015 anyone over the age of 55 can draw their savings as a cash amount; however the amount will be subject to income tax depending on the individual’s personal circumstances.

The Local Government Pension Scheme is not a defined contribution scheme and therefore you are not able to access your pension benefits as a cash amount directly from the Scheme. Options available to members from age 55 include:

  • To continue to pay into the LGPS and build up further pension benefits. At retirement you will receive an inflation-proofed pension and the option to take up to 25% of the value of your pension pot as tax-free cash.
  • To retire on a voluntary basis and have immediate access to pension benefits which is payable for life; although the benefits may be reduced due to early payment. (If you left before 01/04/2014 and hold a deferred benefit within the Pension Fund you will need to seek permission from your former employer for the release of your benefits between age 55 – 60).
  • Protection for your family; if you die whilst in service a lump sum death grant is payable to your nominated person(s) along with a survivors pension to your spouse, registered civil partner, qualifying co-habiting partner and any eligible child(ren).
  • Transfer pension benefits out of the LGPS to an alternative pension arrangement providing you have left the scheme, are not within 1 year of your normal pension age (State Pension Age, or at least age 65), or are already in receipt of your LGPS pension.
  • A cash equivalent transfer value will be provided to you within 3 months from the date that the Pension Fund receives your request and the quotation has a guarantee date of 3 months from date of calculation. You will only be entitled to one cash equivalent transfer value within any 12 month period. If you make a positive election to transfer your benefits out of the Pension Fund to an alternative pension arrangement, payment of the transfer value will be made within 6 months of the guarantee date.

Considering transferring your LGPS pension to an alternative arrangement?

Whilst the Government has confirmed that transfers from defined benefit schemes such as the Local Government Pension Scheme, will be allowed to continue after April 2015; satisfactory member election will have to be provided before the transfer can go ahead.

  • Where the Cash Equivalent Value of the pension benefits exceeds £30,000; it is mandatory that members seek independent financial advice from an approved Financial Advisor authorised by the Financial Conduct Authority (FCA) before proceeding with the transfer. Please visit the following link fca.org.uk/register and check your adviser is listed; this will avoid the threat of potential fraudulent activity and inappropriate advice.
  • Although it is not mandatory to seek independent financial advice if the benefits are less than £30,000 it is strongly recommended that professional advice is sought so that any commission paid or tax charges incurred at time of transfer is understood beforehand.
  • If you proceed with the transfer out of your LGPS benefits and this proves to be financially disadvantageous to you, you will need to seek recompense from the authorised independent adviser who provided you with the advice. You will not be reinstated back into or receive compensation from the LGPS Pension Fund.
  • Costs incurred by seeking independent financial advice will be met by you and you must provide evidence that you have received independent financial advice to the Pension Fund at the time of the transfer.

For further impartial advice on transferring your benefits out of the LGPS, please click on the following link which will take you to the Pensions Regulator Website:

http://www.thepensionsregulator.gov.uk/individuals/dangers-of-pension-scams.aspx

If you have already sought advice and opted for a positive election to transfer your benefits out of the LGPS and have any concerns, please contact the Action Fraud Department on 0300 123 2040.

The Government has set up a free and impartial website to obtain further information called Pension Wise. This can be accessed by visiting the following link: https://www.pensionwise.gov.uk/ 

In-house Additional Voluntary Contributions (AVC’s)

The new reforms may apply to members who are paying AVCs but legislation has not yet been made as to how this will work. Further information will be provided when it is available.