Transfer of pension rights


Table of Contents

Transfer of pension rights

Other than a scheme member who opts out of the Scheme within 3 months of joining, without having transferred in a previous pension right to the Scheme, all scheme members have the right to transfer accrued pension benefits to another pension arrangement (even those members who cease employment within the first 3 months of membership (without having transferred in a previous pension benefit). Pension rights can be transferred to another local authority operating the LGPS, to another occupational pension scheme or to a personal pension arrangement

Transfers between Local Authority Pension Funds are called Inter-fund Adjustments and are calculated in a totally different way to transfers to other schemes. Such transfers provide day for day service between Local Government Funds. Scheme members who are transferring between Local Government employers need to be aware that their benefits will be based on their final pay so if, by transferring from one employer to another employer, the member's rate of pay is reduced, the member will need to make a decision whether to transfer or opt for deferred benefits.

With effect from 1 April 2004, scheme regulations restrict the time to make a decision to amalgamate different periods of Local Government Pension Scheme membership to 12 months from the time of re-joining the LGPS. There is discretion available to employers to extend this 12 month deadline.

Active members on 1 April 2004 who had a deferred benefit from a previous membership period had until 31 March 2005 to elect to amalgamate their former benefit with their current employment.

Pension schemes are categorised in order to determine what action needs to be taken when calculating the current transfer value. "Club" schemes are those within the public sector, or those outside of the public sector who have agreed to use the public sector method of calculating transfer values, and award service credits derived from incoming transfer values.

"Non-club" schemes is the term used to describe those schemes which can pay and receive transfer values but who do not use the public sector method of calculation and do not award service credits.

For the purpose of this guide it is useful to understand the processes behind completing a successful transfer of benefits rather than the method of calculating transfer values.

When a scheme member leaves local government employment or opts out of the LGPS a Form LGS15C should be completed (or other notification method agreed between the Scheme employer and the Scheme administrators) and sent to the pensions administration team. The member is sent one of two option forms by the pension administrators depending on whether the member has an entitlement to deferred benefits.

Each form contains an option to transfer the accrued pension rights held in the LGPS. The member should complete the relevant section of the form indicating to the pension administrators that a transfer value should be calculated.

At the same time, the member's new pension scheme administrators should, upon receipt of a request from the member, contact the pension administrators in order to obtain the current transfer value payable. This amount will be guaranteed for a period of three months.

The pension administrators send the details to the new pension scheme administrators who set out the information provided in such a way that the member should be able to make a decision as to whether or not the transfer of the pension rights would be the best option available.

Both administrators will probably ask the member to sign a form declaring the decision made, upon receipt of which a payment will be requested. Providing the decision is made within 3 months of the original calculation there will be no need for a re-calculation to be performed.

A scheme member cannot make a decision until all the facts have been presented and a transfer will not take place until authorised by the member.

Note: Scheme regulations do state that an application by a scheme member to transfer former pension rights into the LGPS should be made before the expiry of 12 months starting from the date that the member joined the scheme. There is discretion, however, for employers to extend that period.