Possibly leaving LGPS, under 2 years vesting period

snowqueen555

Hello
If I were to leave my current local authority job with under 2 years service, what exactly happens to my LGPS contributions? I also transferred in a defined contribution pot into my LGPS, the rules say I will be refunded any contributions. Ideally I could just transfer the whole lot (with current value) into my next pension scheme, which would be in the civil service pension scheme, is this possible?

Silvertabby

Yes, it is.  Even without the funds you transferred in, you would be able to transfer out your LGPS benefits (as long as you had accrued a minimum 3 months service) to another pension fund.

Note that the CSPS has a 12 month limit on transfers in, so set the ball rolling as soon as you can.

snowqueen555

Ok, I had assumed I would get refunded, so my LGPS "pot" stays as is in a suspended state or something?

Silvertabby

snowqueen555 said:

Ok, I had assumed I would get refunded, so my LGPS "pot" stays as is in a suspended state or something?

In theory, it would increase each April - but as you need to transfer it to the CSPS as soon as you can that won't be an issue.

hyubh

If I were to leave my current local authority job with under 2 years service, what exactly happens to my LGPS contributions?

If you hadn't transferred in from another scheme, then your options would be a refund of your own contributions (less tax), transfer out, or waiting for 5 years in case you rejoined the scheme (and so could aggregate benefits).

I also transferred in a defined contribution pot into my LGPS

This makes you eligible for preserved benefits, and therefore, ineligible for a refund.

Ideally I could just transfer the whole lot (with current value) into my next pension scheme, which would be in the civil service pension scheme, is this possible?

As Silvertabby says, yes, with a 12 month timelimit. It will probably buy in the civil service scheme a pretty similar amount of CARE pension forgone in the LGPS, though the transfer quotation will give the detail.

mark55man

so if you choose not to transfer it into the CSPS you have two options (based on a similar situation for my DS) one - they will write to you about preserved benefits (which is effectively the cash value of the benefits you have accrued).  In my DS case he had 6 months to do this or lose the value (as his employer did not require contributions).  If you had actually paid contributions in, I'm not sure what the situation is.  However the preserved benefit money had to go into the pension.

In which case 90% of the time you would be better transferring your service into your new scheme. Effectively  taking the money transfer (and not the service transfer) is like cashing in a DB scheme - which is rarely a good idea - particularly for someone a long way from retirement 

hyubh

mark88man said:

so if you choose not to transfer it into the CSPS you have two options (based on a similar situation for my DS) one - they will write to you about preserved benefits (which is effectively the cash value of the benefits you have accrued).

Transferring in from another scheme overrides the usual rule about needing two years membership for preserved benefits. So, without transferring out, a preserved benefit in the scheme is the default.

In my DS case he had 6 months to do this or lose the value (as his employer did not require contributions).

Well the LGPS has always been contributory since the earliest days nearly a century ago, so the question is academic for the OP. But yes, if a DB scheme was non-contributory (e.g. the big banks, back in the day), then transferring out when a preserved benefit was not possible would clearly be the sensible thing to do.

In which case 90% of the time you would be better transferring your service into your new scheme. Effectively  taking the money transfer (and not the service transfer) is like cashing in a DB scheme - which is rarely a good idea - particularly for someone a long way from retirement 

Well taking a transfer is better than taking a refund, as the former will reflect (to an extent) the employer as well as employee contribution. That said, in England and Wales at least, until the CARE scheme came in (2014), the LGPS was unusual in allowing so-called 'frozen' or 'deferred' refunds (i.e. short service periods where a refund or transfer out was not taken) to sit around indeterminately, with scheme rules saying they must be opened up again and aggregated to the new membership if the member rejoined. If rejoining never happened, then come old age, the individual would be due a refund with a nice amount of interest, conversely if they did rejoin, then they would accrue a final salary pension across potentially several discontinuous periods of membership. The CARE scheme rules bring things into line with nearly every other DB scheme though (public sector included), giving a 5 year cap on the refund being made, which makes taking the CETV when possible more attractive.

snowqueen555

Thanks for the replies!
I don't know what "preserved benefits" means, does this mean I don't have to transfer it, despite only being in the LGPS for about 19 months? That would probably be ideal for me to just leave it there. I cannot see anything in the guidance  https://www.avonpensionfund.org.uk/sites/default/files/MG05-20190620.pdf

The administrators for my LGPS have made errors a few times, and have only been picked up because I have noticed it. Things like my start and ends dates, and also the fact my transfer in wasn't even showing until I contacted them.

The only evidence of the transfer in is in my online account, says additional credit, or something like that. I feel like I would like to get some kind of writing to confirm my pension  has "preserved benefits", is this something I can request?

Silvertabby

You are that very rare person - someone who transfers previous pension rights into the LGPS and then leaves within 2 years.

You have to dig into the regs rather than the member scheme literature to get the answer but, the essential question is:

When you left your previous pension scheme, did you have the right to take a refund of those contributions? 

If no, then you can't take a refund of either those contributions or your LGPS contributions now.  Your only options would be to leave your total benefits deferred in the LGPS or to transfer them out.

If yes, then it gets complicated - you may be entitled to a refund (of both lots of contributions), deferred benefits or a transfer out.

When you leave the LGPS you will be issued with your leaver details.  As it is more than likely (but not 100%) that your DC contributions were non-refundable, then those leaver details should just be in the form of a deferred benefit statement.

snowqueen555

Just got an update, apparently I will get deferred benefit, so I will likely keep it where it is