LGPS Refund

Hi All,

Fairly straight forward question - I joined the LGPS last year in May 2016 with an 8.5% contribution from me and my employer putting in a sizeable contribution too. I work for a college and this has been one of the big perks of doing the job. However (yes it's foolish I know), I have been exploring leaving the LGPS temporarily while I a) pay off student loan and b) settle in to paying out some significant costs for something else. So my question is: if I have been paying in 8.5% for a salary of £60k since last May - how much would I get back before the 2 year rule? And would my employer contributions still exist?

What do I deduct from the contributions is it 20% for tax/NI?

I'm really confused and cannot find a calculator.

I don't even know if it's possible but I did read that if it's before 2 years, it's a possibility?

Thanks in advance

Comments

  • Silvertabby
    Silvertabby Posts: 8,980
    First Anniversary Name Dropper Photogenic First Post
    Forumite
    edited 18 September 2017 at 9:02PM
    As long as you don't have any other LGPS benefits (including with other Local Authorities) and opt out before you have completed 2 calendar years then yes, it is possible to take a refund of your contributions (less tax).

    You would only get your own contributions back - your employer's (substantial) contributions would be forfeit.

    Think long and hard before you take such a drastic step. Have you considered the 50:50 option instead of totally opting out? This means that you would pay half contributions in return for half pension - but you would keep the death in service/ill health benefits.
  • hyubh
    hyubh Posts: 3,526
    First Anniversary Name Dropper First Post
    Forumite
    dilemma10 wrote: »
    I work for a college and this has been one of the big perks of doing the job. However (yes it's foolish I know), I have been exploring leaving the LGPS temporarily while I a) pay off student loan and b) settle in to paying out some significant costs for something else.

    You're right, that would be foolish. Is (a) a regular student loan...?
    So my question is: if I have been paying in 8.5% for a salary of £60k since last May - how much would I get back before the 2 year rule?

    As Silvertabby says, your own contributions less the tax relief HMRC will reclaim.
    And would my employer contributions still exist?

    Lost.
    What do I deduct from the contributions is it 20% for tax/NI?

    Your taxable pay was/is your gross pay less your LGPS contributions, so a refund will lead to that being unwound. NIC would have been deducted from gross, however if you joined the scheme before 6/4/16 then you would have been 'contracted out' and therefore paying a lower rate of NI than if you weren't a member. Ergo, opting out and taking a refund if would lead to you being retrospectively contracted back in and the refund adjusted downward accordingly.
  • p00hsticks
    p00hsticks Posts: 12,691
    First Post Name Dropper Photogenic First Anniversary
    Forumite
    As long as you don't have any other LGPS benefits (including with other Local Authorities) and opt out before you have completed 2 calendar years then yes, it is possible to take a refund of your contributions (less tax).

    You would only get your own contributions back - your employer's (substantial) contributions would be forfeit.

    I know you are an expert in this, Silvertabby, but are you absolutely sure ? I was recently in the Civil Service Pension scheme (Nuvos / Alpha) but left after 20 months, and - because I has been there less than 2 years - was given the option of either having my contributions refunded or of transferring a sum representing both my and the employer contributions (about six times more)into a SIPP I set up .

    Does the LGPS scheme not offer anything similar ?
  • hyubh
    hyubh Posts: 3,526
    First Anniversary Name Dropper First Post
    Forumite
    edited 18 September 2017 at 10:56PM
    p00hsticks wrote: »
    I know you are an expert in this, Silvertabby, but are you absolutely sure ? I was recently in the Civil Service Pension scheme (Nuvos / Alpha) but left after 20 months, and - because I has been there less than 2 years - was given the option of either having my contributions refunded or of transferring a sum representing both my and the employer contributions (about six times more)into a SIPP I set up .

    This does not contradict what she said. What are you referring to exactly - a refund or a transfer out? If a transfer out, then (unlike the CSPS) two years doesn't come into it with the LGPS - i.e., you can stay in the scheme much longer then transfer out to a money purchase arrangement if you so choose. If a refund, then the CSPS isn't any different to the LGPS on that score, i.e, you lose the benefit of the employer contribution.
  • Apodemus
    Apodemus Posts: 3,384
    First Anniversary Name Dropper First Post Combo Breaker
    Forumite
    Dilemma10, you need to address your real dilemma and that is how to get your finances restructured within your existing (and quite attractive!) take-home pay. Perhaps set a more realistic schedule for getting rid of the student debt and find other ways of meeting the other "significant cost". Perhaps you can live more frugally for a period or take on extra work for more income, or sell something. But cashing in that pension and stopping pension payments seems like it should be the last option that you consider.
  • p00hsticks
    p00hsticks Posts: 12,691
    First Post Name Dropper Photogenic First Anniversary
    Forumite
    hyubh wrote: »
    This does not contradict what she said. What are you referring to exactly - a refund or a transfer out?

    Well, the OP's original questions were....
    dilemma10 wrote: »
    if I have been paying in 8.5% for a salary of £60k since last May - how much would I get back before the 2 year rule? And would my employer contributions still exist?

    What do I deduct from the contributions is it 20% for tax/NI?

    Silvertabby has taken this to refer to being about a refund - so employees contributions only, less tax and NI.

    I'm just pointing out that there is potentially another possibility to 'get back' the money - that of transfering out into another (personal) pension, which would preserve the employers contributions and require no tax or NI payments, and thus be worth considerably more, although the money would not be available until the age of 55 (under current legislation).
  • hyubh
    hyubh Posts: 3,526
    First Anniversary Name Dropper First Post
    Forumite
    p00hsticks wrote: »
    Silvertabby has taken this to refer to being about a refund - so employees contributions only, less tax and NI.

    Well yeah, because that's what the OP asked about ;)
    I'm just pointing out that there is potentially another possibility to 'get back' the money - that of transfering out into another (personal) pension, which would preserve the employers contributions and require no tax or NI payments.

    That won't 'get back the money' for the purposes of paying off a student loan and 'some significant costs for something else' however.
  • p00hsticks
    p00hsticks Posts: 12,691
    First Post Name Dropper Photogenic First Anniversary
    Forumite
    hyubh wrote: »
    That won't 'get back the money' for the purposes of paying off a student loan and 'some significant costs for something else' however.

    I'd read it more as that the OP wanted to save on the ongoing cost of the pension contributions during this period, rather than specifically use the refund to pay for these things, but I take your point.

    I'm with Apodemus though, that quitting the pension should really be a last resort and the OP would be better off exploring what other options are available. Dropping out of a generous pension scheme in order to pay off a student loan doesn't really make financial sense.
  • Silvertabby
    Silvertabby Posts: 8,980
    First Anniversary Name Dropper Photogenic First Post
    Forumite
    edited 19 September 2017 at 12:33PM
    Yes, LGPS benefits accrued from more than 3 months service (even if less than 2 years) may be transferred to another pension scheme/SIPP. I didn't mention this as OP only asked about an immediate refund.

    If OP does go ahead with the opt out, then he/she will be given further information and options once his/her pension record has been finalised.

    ie, refund of own contributions less tax or transfer to another (approved) pension scheme.
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 342.6K Banking & Borrowing
  • 249.9K Reduce Debt & Boost Income
  • 449.5K Spending & Discounts
  • 234.7K Work, Benefits & Business
  • 607.2K Mortgages, Homes & Bills
  • 172.8K Life & Family
  • 247.5K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards