Freedom and Choice - Transfers from the LGPS to Defined Contribution Schemes
Questions and Answers for LGPS members
age 55 or over, and
have a pension based on how much has been paid into their pot (a Defined Contribution pension).
purchasing an annuity (annual pension) or scheme pension if offered by the scheme
taking a number of cash sums at different stages
taking the entire pot as cash in one go.
Yes, if you cease membership of the LGPS and wish to use the right to transfer the value of your LGPS Defined Benefits to a Defined Contribution pension scheme which offers flexible benefits you will be obliged by law to obtain appropriate independent advice, at your own cost, from an authorised independent adviser, who is registered with the Financial Conduct Authority (FCA) or from an appointed representative (see Q7 for more information).
You must prove that this advice has been taken before any payment of a transfer can be made from the LGPS Pension Fund(s) to a Defined Contribution pension scheme offering flexible benefits.
You are only entitled to request one transfer quotation in any 12 month period and, if you wish to proceed with a transfer, the election to proceed must be made at least 12 months before your Normal Pension Age in the LGPS or, if you are a Pension Credit member*, at least 12 months before your Normal Benefit Age.
In addition you can only transfer benefits from the LGPS if you have left the scheme and you have not already drawn benefits from the LGPS (either in your current employment or any earlier employment).
*A Pension Credit member is a person who, as part of a settlement following divorce or dissolution of a civil partnership, has been given a share of their ex-spouse’s or ex-civil partner’s pension benefits in the Scheme which the Pension Credit member now holds in the Scheme in their own right.
Yes, if the total value of all your LGPS benefits* across all LGPS Pension Funds is £30,000** or less then you are not legally required to take advice.
However, given the impact on your LGPS benefits, you are recommended to take such advice regardless of the legal requirement.
In addition, if you leave the LGPS with 3 or more months but less than 2 years membership (and you do not have an entitlement to a deferred benefit in the LGPS in respect of that membership) you would not legally be required to take advice. However, given the impact on your LGPS benefits, you would again be recommended to take such advice regardless of the legal requirement.
*LGPS benefits include active, deferred, deferred refund and pension credit benefits.
**This £30,000 limit is across the scheme so if you are a member in the LGPS in England and Wales it’s the value of all benefits in that scheme, if you are a member in the LGPS in Scotland it's the value of all benefits in that scheme and if you are a member in the LGPS in Northern Ireland it's the value of all benefits in that scheme.
You will need to request a transfer value quotation from all LGPS Pension Funds in which you have benefits in the scheme.
The total value of your benefits is the sum of all these transfer values. If the total amount is more than £30,000 then you will be legally required to take advice.
From the point of transfer all rights to any benefits of any description in any circumstance in the LGPS included in the transfer are extinguished.
If you hold more than one deferred benefit under the Scheme, in either the same or separate Funds, it is not possible to transfer out only one of the deferred benefits; if you wish to transfer out you must elect to transfer all or none of the deferred benefits you hold.
This restriction only applies to deferred benefits held under the same Scheme. As the LGPS in England & Wales, Scotland and Northern Ireland are all different schemes, a member holding a deferred benefit in both LGPS England & Wales and LGPS Scotland can decide to transfer out one and not the other.
Can the LGPS Pension Fund give me names of an authorised independent adviser or appointed representative?
The cost will vary depending on the authorised independent adviser or appointed representative you decide to use.
You, as the member choosing to transfer, will be expected to meet the cost of the advice. You should ensure that you get a clear and understandable quote of the cost from the authorised independent adviser or appointed representative before committing to receiving advice from them.
Do I have to follow the advice that I receive from the authorised independent adviser or appointed representative?
However, if you choose to ignore the advice and proceed with the transfer to a registered Defined Contribution scheme offering flexible benefits (or to a qualifying recognised overseas pension scheme) you will have no redress from either the authorised independent adviser/appointed representative or from the LGPS Pension Fund, should that decision prove to be financially disadvantageous to you.
If the advice you are given from an authorised independent adviser or appointed representative is to proceed with the transfer and it proves to be financially disadvantageous to you, you would need to seek redress from the authorised independent adviser or appointed representative who provided that advice.
There will be no redress from, or reinstatement in, the LGPS Pension Fund from which the benefits have been transferred.
that advice given to you was specific to the transfer
that the adviser is authorised to provide such advice, or in the case of an appointed representative, that the principal financial adviser is authorised to provide such advice
of the FCA reference number of the company for whom the adviser works or for whom the representative is an agent
your name, and the name of the scheme from which the transfer is being sought and in respect of which the advice was given.
Are there any other new rules which could impact on the transfer value of my accrued LGPS pension benefits?
In circumstances where the Government is convinced that the number of transfers to Defined Contribution schemes offering flexible benefits may result in a risk to the LGPS Pension Fund and, hence, to local taxpayers, the amount of the transfer value can be reduced.
An option to transfer must (other than in respect of AVCs) be made at least 12 months before your Normal Pension Age or, if you are a Pension Credit member, at least 12 months before your Normal Benefit Age.
If you wish to investigate a transfer of your pension rights, your Pension Fund has to (other than in respect of AVCs) provide you with a transfer value quotation within three months of receiving your request and the quotation will be guarantee for a period of three months from the date of calculation (known as the ‘Guarantee Date’).
If you wish to proceed with the transfer, a written option to proceed must be received by the LGPS Pension Fund within three months of the ‘Guarantee Date’.
If you opt to proceed, the normal time limit for payment of the guaranteed transfer value will be six months from the ‘Guarantee Date’.
If payment is not made within this period your Pension Fund will need to recalculate the value as at the actual date of payment and pay the recalculated value or, if it is greater, the original value plus interest.
If you are considering whether to transfer benefits, make sure you have full information about the two pension arrangements i.e. details of what your benefits are worth in the LGPS and details of what your benefits would be worth in the new pension scheme, if transferred.