Deferring your Pension
If a member leaves their position or opts out of the scheme, they are entitled to defer their pension benefits in the scheme. By default a member's benefits will be deferred in the scheme if they are not entitled to immediate payment of their pension.
Even if a member is entitled to immediate payment of their pension benefits they are still allowed to defer their benefits within the scheme if they wish (not available if a redundancy/efficiency/ill health/flexible retirement case is applicable or the member has reached 75 years old).
What do you need to do?
If you are entitled to payment of your pension benefits, after leaving a position within the LGPS, your employer shall notify the Clwyd Pension Fund of all your pensionable details by completing a termination form. Upon calculating your pensionable benefits for that single post, we shall write out to yourself with a number of forms to complete and return to ourselves.
Among these forms will be a Retirement Conversion Option Form, which will indicate your options regarding converting pension to lump sum. However, if the benefits are reduced due to early retirement, one option will include to defer your benefits in the scheme until a later date. If this is what you wish to do, we will require you to tick the relevant box, sign and date the form and return it to the Clwyd Pension Fund using the pre-paid envelope provided.
This will remain in the scheme until you reach your Normal Pension Age and have availability to unreduced benefits, or upon written request to draw the benefits from yourself.
Becoming a deferred member
A deferred member is a member who is no longer paying into the scheme, and has kept their pension within the Clwyd Pension Fund but who is not drawing their pension yet. All service accrued up until 31/03/2014 is calculated using the Final Salary Pensionable Pay at date of leaving, whereas all post 1st April 2014 benefits shall be calculated as CARE scheme benefits.
As a deferred member, your pension benefits will increase in value each year in line with inflation, and you shall receive an annual deferred benefit statement each year to indicate the current value of your deferred benefits. Pensions increase is paid in line with the annual increase in the Consumer Prices Index (CPI) at the previous September and is currently paid from the first Monday of each new tax year.
You have the option to transfer out your deferred benefits to another pension scheme if you wish. In order to investigate this, you will need to contact the pension scheme to which you intend to transfer your pension benefits to, who will then contact us to arrange for the transfer to take place.
The default option is that you can keep your pension benefits with us until you decide to draw them.
Request payment of your deferred benefits
You can choose to take early payment of your deferred benefits from age 55.
You do not need the consent of your former employer to withdraw your pension before your Normal Pension Age. If you choose to withdraw your deferred benefits before your Normal Pension Age, your benefits will usually be reduced to take account of their early payment and the fact that your pension will be paid for longer.
However, if you meet the Rule of 85 and you want to take your pension benefits before your Normal Pension Age, the Rule of 85 will only automatically switch on from age 60. If you decide to take your pension before age 60 and you meet the Rule of 85, this rule will not automatically switch on. You would need your former employer’s consent for the Rule of 85 to be switched on. If the Rule of 85 is activated, this means that you will have lower reductions taken from your pension compared to if the Rule of 85 is not switched on.
If your benefits were deferred in the Clwyd Pension Fund because you opted out of the scheme, these benefits cannot be paid to you until you finish your employment in the job that you opted out of.
If you no longer wish to contribute to your employer's pension scheme, you can opt out but will be automatically re-enrolled every three years, although you can then choose to opt out again. You can opt out of the Scheme at any time but you must have already started that job to do so.
Once opted out, you will end any active member protections for your family, plus you may pay more tax.
If a member outs out of the LGPS within 3 months of joining, the refund of contributions shall be granted through the employer’s payroll department in their next pay.
Any opt outs following this 3 month period or if you leave your employment before reaching your vesting period, a possible refund may be payable via the Clwyd Pension Fund subject to certain criteria.
In the scheme for more than 3 months but less than 2 years
If you opt out of the Scheme with less than 2 years membership you may be entitled to a refund of your pension contributions, less a deduction for tax and a further deduction to buy you back into the State Second Pension (if applicable).
If you are eligible to receive a refund of pension contributions, you will receive the refund minus tax and possibly an amount of additional national insurance. This is due to the contributions being relieved of tax when they are paid into the Clwyd Pension Fund, whilst prior to April 2016 you would have paid lower National Insurance contributions than if you had not been an LGPS member. This deduction is to ensure that you are re-instated in the State Second Pension (S2P) for the sustained period where you paid reduced National Insurance contributions.
In the scheme for more than 2 years
If you opt out with 2 years or more membership you would not be entitled to a refund, and will be awarded with a deferred benefit. The amount you held in your pension account up until date of leaving, is calculated and kept within the fund until you retire or transfer to another pension arrangement.
If you have opted out of the LGPS and continue to work in that position, you will not be able to access your pensionable benefits until you end your employment in that single position.
Refund by employer
If a member outs out of the LGPS within 3 months of joining, a refund of contributions shall be granted through the employer’s payroll department in their next pay packet.
Refund by Clwyd Pension Fund
Any opt outs following this 3 month period or if a member leaves employment before reaching their vesting period, the refund process shall be actioned by the Clwyd Pension Fund.