Opting out

Why have I been put into the pension scheme?

Automatic enrolment laws require all employers to enrol their workers into a workplace pension scheme if they are not already in one. They are designed to help people save for their retirement. See: Automatic enrolment.

Although you can opt out of the LGPS at any point after you start work, under automatic enrolment your employer may have to put you back into the pension scheme and start deducting contributions again.

Your employer must tell you if they enrol you into the LGPS. If you become a member but you do not want to be, you will need to opt out by completing another opt out form, even if you have only recently done so.

What if I do not want to join?

Your employer may have to enrol you into the LGPS. Once you are enrolled, it is possible to opt out but you should think very carefully before doing this as it will affect your future pension rights.

What are the implications of opting out?

Deciding to opt out is a very important decision. We cannot advise you whether you should remain in the scheme and you may wish to seek independent financial advice before you make this decision.

Your employer cannot force you to stay in the scheme or make you opt out of the LGPS.

As a member of the LGPS, you:

  • build up a pension that increases annually in line with inflation,
  • can take your pension early if you are permanently unable to do your job because of ill health,
  • benefit from immediate life cover,
  • benefit from a pension for your spouse, civil partner or eligible cohabiting partner and eligible children in the event of death in service, if you die after satisfying the 2 year qualifying period.

However, if you choose to opt out of the scheme:

  • you will lose the right to employer pension contributions,
  • you may have a lower income when you retire,
  • there will be no death in service benefits payable,
  • you will not build up a pension which you could claim early in the event of ill health,
  • if you opt out and are awarded a deferred pension, then this deferred pension must remain separate and cannot be joined to any future period of membership if you re-join the LGPS.

You cannot opt out of the scheme before joining.

You can find the opt out forms at: Opting out

What happens to my pension if I opt out?

If you are no longer paying into the LGPS, then you will be eligible for a refund or deferred pension depending on how long you made contributions, see below.

What happens if I opt out with two or more years' membership?

If you opt out of the LGPS with two or more years' membership, including any membership transferred into your LGPS pension from other schemes:

  • your LGPS pension account will become deferred (frozen), see: Your deferred pension,
  • you will not be able to draw your pension until you leave your job,
  • if you re-join the scheme in the same job, you will not be permitted to join the two periods of membership.
What happens if I opt out with less than 3 months' membership?

If you opt out of the LGPS with less than 3 months membership, you will be treated as if you have never been a member and contributions that you have paid will be refunded to you by your employer's payroll.

What happens if I opt out with at least 3 months' but less than two years' membership?

If:

  • you have been a member for 3 months or more, and
  • you have less than two years' membership, including any transferred into your LGPS pension from other schemes, and
  • you do not have another LGPS pension account in England and Wales,

then you may claim a refund of your contributions, less a deduction for tax. Contributions to the LGPS are deducted from your pay before tax. However if you take a refund then the tax benefit is lost and so, in all cases, tax will be deducted from the refund.

If you are not paying into another LGPS pension account, you can leave the contributions frozen for up to five years while you decide what to do with them. You could:

  • transfer them to another pension scheme.
  • claim a refund, less a deduction for tax.

However, if you re-join the scheme, the frozen contributions will be added to your new pension account.

If you do not make a decision within five years, you will have to take a refund.

What if I change my mind later on?

If you change your mind and you wish to start paying contributions again in the same employment, you should contact your employer who will re-enrol you into the scheme from the next available payroll.

Re-joining the LGPS

If you have opted out of a pension account with more than 2 years' membership, you will be awarded a deferred pension. If you later re-join the scheme then you will not be allowed to combine the two periods of membership.