Transferring Out
If you are no longer making pension contributions, your benefits can be transferred out of the Clwyd Pension Fund at any time providing that your new employer/pension provider is willing to accept the transfer. You should check that your new pension provider will accept transfers and that you are within their given time limits before requesting a transfer out of the Clwyd Pension Fund.
What do I need to do to instigate a transfer out?
You should contact your new pension provider directly to instigate the transfer by giving permission to speak to the Clwyd Pension Fund on your behalf. Your pension provider may have an online process or form which you need to complete to instigate the transfer.
Please note that transfers can be a lengthy process.
Clwyd Pension Fund process
You cannot transfer your benefits if you leave less than one year before your Normal Pension Age.
This NPA is relevant to what membership you hold in the LGPS, if you have pre 31/03/2014 membership only this shall be your 65th birthday, however if you hold any post 01/04/2014 membership, this shall be the lowest of your state pension age or 65th birthday.
Once the process begins, your new pension provider will require a transfer value quotation, which the Clwyd Pension Fund will guarantee for a period of three months from the date of calculation. Your new pension provider can then advise you of the additional benefits the transfer will buy in their scheme.
If you are considering whether to transfer benefits, make sure you have full information about the two pension arrangements; 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. When you compare your options, don’t forget that your LGPS benefits are guaranteed cost of living increases.
You may wish to take independent financial advice when making this decision as this is not available directly from the Clwyd Pension Fund.
A transfer payment represents the cash equivalent value of your LGPS benefits at the time of the transfer. If a transfer payment is made, you will not be entitled to any further benefits from the LGPS for yourself, your spouse civil partner, dependents nor co-habiting partner nominated by you.
Freedom and Choice
From April 2015 significant changes were made to how and when individuals could access their pension benefits, mainly affecting defined contribution members.
Prior to the change, defined contribution scheme members built up pension pots via contributions made by themselves, their employer and any investment returns. The money that individuals have built up could then be used to buy an annuity which is an income for life paid through an insurance company (additional dependent benefits could also be bought).
Although the regulation changes directly affect individuals who hold a defined contributions pension benefit it could affect members of the LGPS if they were to transfer their LGPS defined benefits out to a defined contributions scheme.
Various ‘Freedom and Choice’ options are now available to members of defined contributions schemes on how they wish to use their pension pots, they can be drawn in the following ways:
- To take an annuity in the same way as before
- To draw their money as cash, whether this is all at once or in a series of instalments. Where pension pots taken as cash, the initial 25% would be tax free whilst the remainder would be taxed in the same way that any other income would be taxed.
- To take a mixture of both the above, buying an annuity with some of their pot and taking the rest as cash when they wish to do so.
- Transferring out of a guaranteed Defined Benefit scheme such as the LGPS may not generally be in the members best interests, so if you are considering this option it is very important to think very carefully about your decision, and seek financial advice if required, this is not available directly from the Clwyd Pension Fund.
Transfers to Overseas Scheme
Transfers to overseas schemes are possible if the scheme is a Recognised Overseas Pension Scheme (ROPS). A list of these schemes is held on the HMRC website.
Finacial Advice
Although LGPS administrators cannot give financial advice it is recommended that members take advice before making transfers to other pension schemes. Financial advice is compulsory for transfers which are greater than £30,000 to Defined Contribution schemes which offer Freedom and Choice benefits.
A Questions and Answers sheet is available for Freedom and Choice from the below link:
http://www.lgpsregs.org/images/EmployeesGuides/QandADBtoDCforMembersv1.3.doc
Beware of scams
The introduction of new freedom and choice options regarding people’s finances can be appealing; however, members should be wary of any scams which have arisen further to its introduction, and we strongly advise members to be cautious.
This could be through cold calls, emails, doorstep visits, promises of unrealistic investment opportunities, pressuring individuals to make quick and rash decisions.
Further information regarding pension scams can be found on the below link: