Leaving the LGPS

When to submit a Leavers form

There can be some confusion on when you need to submit a Leavers form so hopefully the guidance below should help:

A Leaver form is required when a member:

• has multiple employments and is ceasing one but continuing with the other role(s)
• opts-out of the Scheme in any of their roles
• dies in service
• leaves the employment completely
• takes Flexible Retirement
• moves to a lower grade role

A Leaver form is not required when a member:

• changes roles with the same employer – instead you need to notify us of this change using the monthly interface.
• reaches the end of their temp cover role at a higher grade
• is TUPE transferred**

**For members involved in a TUPE transfer to an Admitted Body, are part of an academy conversion or a transfer to another Multi-Academy Trust (MAT), the process will be different and we will not require any Leaver forms. Please see our TUPE’s and admitted bodies page or contact the Employer and Communications Team for more information.

• How to notify Peninsula Pensions of a leaver

  You will need to use the leavers spreadsheet to notify us of any members leaving, opting-out and retiring from the Local Government Pension Scheme.  The spreadsheet is designed for multiple entries so you can submit data for more than one member and more than one location/employer number on the same spreadsheet if you process multiple payrolls.

  For any employer led retirements or where you are enhancing the members benefits, you will also need to complete the HR Authorisation form on our Forms page.



Opting out of the LGPS

• Opting out of the LGPS

  Employees are automatically enrolled into the Local Government Pension Scheme (if eligible) but membership is not compulsory so they may opt-out of the pension scheme at any time. They will be brought back into the Scheme on your auto re-enrolment date.

  Members cannot complete an opt out form before starting employment, as everyone must be bought into the scheme on the first day of employment. If they do not want to be in the Scheme, they can complete an opt out form on their first day and if the election is actioned in time for the first pay run, they may not pay any contributions. They cease to be an active member from the next available pay period after the date they have signed the form.

  If they have opted out within three months of joining, the employee is treated as having never joined the scheme in relation to that opt out election and their pension contributions must be refunded through your payroll.

  If they have more than three months’ but less than two years’ membership, they can still receive a refund of contributions, but we must process the refund and make an adjustment for tax. You must submit a copy of the actioned election form with the Leavers’ form which will confirm that they have ceased membership of the scheme.

  Employees are free to opt out and re-join the scheme as many times as they wish. They can also elect for the 50/50 section of the scheme.

  Please note you must not issue opt out forms to any employees.  Please refer them to the member’s pages of the website, where the opt out, opt in and 50/50 election forms can be downloaded, or they can contact us directly.

• What you need to do
  • When an employee completes an opt-out form you must forward it to your payroll section for actioning.

  It should then be dealt with as follows:

  Period in the LGPS in less than three months membership:

  • The opt out form should be forwarded to your payroll department who should then refund any contributions already paid back to the employee through their pay. Payroll should then complete the bottom of opt-out form to confirm refunded via payroll.
  • The leaver’s spreadsheet should be completed to confirm the member has opted out and contributions have been refunded via the payroll.

  Period in the LGPS is more than three months but less than two years membership

  • The Opt out form should be forwarded to your payroll department who should then stop deducting contributions and bring the member out of the pension scheme. Payroll should then complete the bottom of opt-out form to confirm date member stopped paying contributions.
  • The leaver’s spreadsheet should be completed to confirm the member has opted out and contributions have been refunded via the payroll.

  Please refer to our Leaver Spreadsheet Guide to help you with the process.



Leaver’s under age 55

When a member leaves their employment and has more than 3 months’ membership in total and is under age 55, they can choose between:

• a refund of contributions
• deferred benefits
• an immediate pension if they have reached their normal retirement age – see the Leavers age 55 and over
• a transfer out of their accrued pension rights to another pension scheme

Refund of contributions

If a member leaves the Scheme with less than two years qualifying membership in total (including separate posts or other local government membership) they can have a refund of contributions, less a statutory deduction for tax, and in some cases National Insurance.

Entitlement to a refund depends on whether they have had a break of at least a month and one day before returning to work.  If they haven’t had the break, they will not be entitled to a refund and the membership will be combined with the a new pension record.

Important: A refund of contributions through the employer’s payroll must not be given for a member who has ceased employment with less than three months service. This is only possible if the member opts-out of the scheme, as this can be treated as never having been a member.

• What you need to do
  • Complete the leaver’s spreadsheet confirming the reason for leaving, along with the relevant pension contributions and pensionable pay that will allow us to calculate the refund.

  Please refer to our Leaver Spreadsheet Guide to help you with the process.



Deferred benefits

If a member leaves their employment before becoming entitled to immediate payment of their benefits and they have more than two years’ membership, they have an automatic right to a deferred benefit (also known as a preserved benefit).

These benefits are calculated as at the date of leaving the scheme and are payable from the member’s normal retirement age.  Benefits paid before normal retirement age will suffer a reduction for early payment. Members can also defer payment up to age 75 and any benefits drawn after their normal retirement age will be subject to an actuarial increase.

Members who opt out with more than two years membership will also be awarded deferred benefits however, their benefits are not payable until they have ceased employment.

• What you need to do
  • Complete the leaver spreadsheet confirming the reason for leaving, along with the relevant pension contributions and pensionable pay that will allow us to calculate the deferred benefit.

  Please refer to our Leaver Spreadsheet Guide to help you with the process.

• Transfer out of pension rights

  Once a member has been awarded a deferred benefit, they have the option to preserve it within the pension scheme until they reach their normal pension age or they can choose to transfer their accrued pension rights to:

  • Another Local Government Pension Scheme authority
  • Another occupational pension scheme
  • A personal pension provider

  Members who have opted out will not be able to transfer their deferred pension to another provider until they have ceased their employment.



Leavers age 55 or over

Under the Local Government Pension Scheme, the normal retirement age for members is their state pension age or age 65, whichever is later.

• Types of retirement

  Normal age retirement	Once a member reaches their state pension age, or age 65 if later, they can simply resign from their employment and start drawing their pension benefits.
  Late retirement	This is the opposite of early voluntary retirement. Where there is an actuarial reduction for early release of benefits, there is an actuarial increase for taking them late.

  There are some circumstances where benefits can be paid earlier than the members normal retirement age:

  Optional/Early voluntary retirement	This is where the employee chooses to retire (leaving employment) at or after age 55: – Pension can be paid immediately but an actuarial reduction is applied for early payment – There is no need for your consent and no cost to you – Employee benefits may be reduced for early payment depending on their age and length of service – you can waive the actuarial reduction and pay the cost of doing so if they wish but you should have a written policy on whether reductions will be waived
  Redundancy	This is where a job has disappeared and a statutory redundancy payment is due. – Unreduced benefits are payable immediately if member is age 55 or over – You must cover the cost of paying pension benefits early – this is called the Strain Cost
  Interests of efficiency	This is where an employee aged 55 or over is retired (leaves employment) on efficiency grounds. – Unreduced benefits are payable immediately – You must cover the cost of paying pension benefits early – this is called the Strain Cost
  Flexible retirement	This is where a member aged 55 or over requests to have their pension benefits paid but continues working for the same employer. – The member must reduce hours or grade (or both) from the date pension benefits are paid – Benefits may be reduced for early payment – you can waive the actuarial reduction and pay the cost of doing so – The member will remain in the scheme and accrue further pension benefits, unless they opt out – You must cover the cost of paying pension benefits early – this is called the Strain Cost – All flexible retirement cases must be fully approved, even if the member is over 60/65 – Flexible retirement is not an automatic benefit in the Scheme – it’s your decision whether you offer this option to your members. You should have a written policy on whether flexible retirement will be allowed and whether reductions will be waived. Please refer to the Employer discretions page for more information.
  Ill-health retirement	This is where an active member with 2 years or more membership has their employment terminated due to ill health and they may be eligible for ill-health retirement. – no minimum age – The member must be deemed to be permanently incapable of carrying out the duties of their role and not immediately capable of undertaking gainful employment (at least 30 hours a week for 12 months) – must meet criteria set in the regulations as certified by an independent medical practitioner – no upfront cost to you as its already covered within your employers’ contributions – there are 3 different tiers of ill health for an active scheme member – the member receives unreduced benefits and may get enhancement dependent upon the tier they fall into – Tier 3 is a reviewable benefit which is payable for a maximum of three years – you must arrange a review after 18 months. Please refer to the Employers Guide to ill health retirement for more information.

• Summary of retirements and possible costs

  ill-health retirement	– No minimum age – Employers consent is needed with medical approval – No strain cost payable as built into employer contribution rate – Benefits are not reduced for early payment – Benefits could be enhanced depending on tier awarded
  Early and normal voluntary retirement	– Minimum age is 55 – Employers consent is not needed – No cost to employer – Benefits may be reduced for early payment – Enhancement of benefits depends on employers policy
  Late retirement	– From State Pension Age (SPA) to Age 75 – Employers consent is not needed – No cost to employer – Benefits are not reduced for early payment – No enhanced benefits
  Flexible retirement	– Minimum age is 55 – Employers consent needed even if over 65 – Strain cost payable by employer – Benefits may be reduced for early payment – Enhancement of benefits depends on employers policy
  Redundancy retirement	– Minimum age is 55 – Employers consent is needed – Strain cost payable by employer – Benefits may be reduced for early payment – Enhancement of benefits depends on employers policy
  Retirement on interests of efficiency	– Minimum age is 55 – Employers consent is needed – Strain cost payable by employer – Benefits may be reduced for early payment – Enhancement of benefits depends on employers policy
  Employer Consent	– Minimum age is 55 – Employers consent is needed – Benefits may be reduced for early payment – Enhancement of benefits depends on employers policy

• Estimates

  You can request an estimate for any of the following employer driven retirements:

  • Redundancy or interests of efficiency
  • Ill Health Retirement (Tier 3)
  • Flexible Retirement

  All calculation results will confirm the strain costs payable, if applicable. Please use the Estimate Request Form on our Forms page.

  Points to note

  • We will not provide any estimates to the member for any of the above types of retirement as these need your consent to release the benefits
  • If a member requires an estimate, please refer them to our Member Self Service portal where they can process voluntary retirement and early leaver calculations themselves.
  • Any estimates you have asked us to produce will be returned directly to you not the member
  • If you ask us to calculate an estimate in relation to ill health, then the relevant certificate must be provided for Tier 1 and Tier 2. If no certificate is provided, the calculation is processed on Tier 3 only
  • If you are having to go through a redundancy exercise and need figures for more than 8 members, we can process these calculations in bulk. Please contact the Employer and Communications Team for more information.

  Please remember that the scheme rules and Government legislation is subject to change, so you should try to request estimates as close to the potential leaving date as you can. Changes to legislation could impact on the figures provided.

• Strain costs

  The funding of the scheme is based on all members retiring at their normal retirement age and receiving their benefits for a certain number of years, as well as a few other factors.

  If benefits are paid before they were expected to be, the pension fund suffers a detriment resulting in a ‘strain’ on the pension fund.

  A very simple example:

  Let’s assume that the LGPS uses a normal retirement age of 67 with an expected age at which a member will die is 90. The scheme therefore expects to pay out the pension for 23 years.

  If the member retires at 60, then the pension is going to have to be paid for 30 years, 7 years longer than planned and therefore there will be a shortfall of monies in the fund.

  This means that:

  • either the member’s pension needs to be reduced or
  • an extra amount of money needs to be paid into the fund by you to allow the pension to be paid for a longer period

  The actual strain cost will depend on the individual member as the amount is based on several factors, including age and gender.

  The calculation formula is determined by the Government Actuary so Peninsula Pensions has no control over how the cost is calculated.

  If you as an employer agree to the early release of a member’s pension, then you are responsible for covering the cost in the following situations:

  • If a member is made redundant or leaves on efficiency grounds and is age 55 or over
  • If a member is retired at age 55 or over on flexible retirement grounds
  • If you choose to waive a member’s actuarial reduction and the member has left on flexible retirement

  What you need to do

  • If you are considering releasing an employee on any of the above grounds, we recommend you obtain an estimate so that you are aware of the possible strain cost. Please use the Bulk Pension Estimate spreadsheet on our Forms page.
  • We will calculate the strain cost when you confirm the member’s benefits can be released for payment. The strain cost can be paid as one lump sum immediately, or over three years where interest is added. If paid over three years, the first payment is due in the April after the member has left.

• Award of additional pension

  You can choose to award a member any amount of additional pension up to the maximum amount allowed for that year but only if your discretions policy allows. The maximum amount is increased each April by Pensions Increase Orders – please see the Additional Pension Contributions page for this year’s purchase limit and our Employers discretions page for more information.

• Forfeiture of pension rights after conviction

  There have been a couple of cases where former LGPS members have been convicted of employment-related offences. All employers have the ability to forfeit a member’s LGPS pension rights if the reason they ceased employment related to these offences. Please see our Employers discretions page for more information.

• Early Voluntary Retirement

  The earliest age at which benefits can be paid from the scheme, other than ill health, is age 55.

  Once a member reaches age 55, they can simply resign from their employment and start drawing their pension benefits.  However, if they have not reached their normal retirement age, the benefits would be actuarially reduced for early payment. Please see the LGPS reduction table for the current rates of reduction.

  There is not normally any ‘Strain cost’ associated with this type of retirement unless you decide to waive the actuarial reduction.

  The member may have a protection under the ’85-year rule’ which relates to previous legislation. This rule was removed from the scheme at the point where the earliest voluntary retirement age was 60 so the protections do not automatically apply between age 55 and 60 which means a member’s benefits would be reduced. You have the option of switching on the protections, but this would incur a strain cost.

  You must have a policy in place for waiving reductions and switching on the ’85-year rule’. Please see the Employer discretions page for more information.

  What you need to do

  • Complete the Leaver spreadsheet confirming the reason for leaving, along with the relevant pay details that will allow us to calculate the pension benefits.

  Please refer to our Leaver Spreadsheet Guide to help you with the process.

• Early Payment of Deferred Benefits

  An ex-employee who left the LGPS with a deferred benefit, can now choose to take early payment of their deferred benefits from age 55 rather than 60. The change to the scheme rules on 14th May 2018, means that an ex-employee no longer needs the consent of their former employer to take their benefits between the ages of 55 and 59.

  Members who left the LGPS with a deferred benefit on or after 1st April 2014 (except councillors) were already able to choose to take early payment of their deferred benefits from age 55 without needing their former employers’ consent, and this has not changed.

  If a member chooses to take deferred benefits earlier than their normal pension age, they will normally be reduced to take account of the fact the pension will be paid for longer. Early reduction factors are set by Government and can vary from time to time. You can waive the actuarial reduction on compassionate grounds but this could result in a cost to you called the ‘Strain Cost’.

  If the ex-member is aged between 55 and 60, then could still be a strain cost payable if they have any protections in place. We therefore suggest that you contact us to obtain an estimate before agreeing to release benefits.

  You need to ensure you have a policy in place to cover early release of benefits and waiving of reductions – please see the Employer discretions page.

• Redundancy and interests of efficiency retirement

  Under current Scheme regulations, if a member’s employment ceases due to redundancy or the employment is terminated by mutual consent on grounds of business efficiency and they are aged 55 or over with at least 2 years’ service, the member is entitled to and must take their pension benefits immediately without any actuarial reduction.

  The member must also take their pension benefits from any additional pension contributions contract they have but unlike the main benefits, the amount will be reduced for early payment.

  In most cases, there will be a ‘strain cost’ payable to the fund by you so we recommend you obtain an estimate for any cases where the member will be age 55 or over at the date of employment ceasing.

  Meaning of ‘business efficiency’ grounds for retirement The scheme regulations themselves do not include a definition of ‘business efficiency’ and there isn’t a general law definition that you can rely on either. It will therefore be your responsibility to interpret what is meant by ‘business efficiency’ within your organisation.

  When considering this, bear in mind that if a member over age 55 is dismissed or their employment terminated by mutual consent and you determine that it is not a redundancy or business efficiency situation, you could be challenged by the member on this matter and cases could be referred to the Pensions Ombudsman who may take a different view.

  What you need to do

  • Complete the Leaver spreadsheet confirming the reason for leaving, along with the relevant pay details that will allow us to calculate the pension benefits.

  Please refer to our Leaver’s Spreadsheet Guide to help you with the process.

• Flexible retirement

  Flexible Retirement allows a member aged 55 or over access to their pension benefits whilst remaining in employment with the same employer.

  There are two conditions that must be met:

  • you must agree to the release of the pension – all flexible retirement cases must be fully approved, even if the member is over 60 or 65
  • the member must reduce hours or grade (or both) from the date pension benefits are paid – there is no specific reductions set out in the regulations so you must confirm the minimum requirements within your flexible retirement policy

  Points to note:

  • you must cover the cost of paying pension benefits early – this is called the Strain Cost
  • if the member takes flexible retirement at their normal retirement age then the benefits are paid without reduction
  • members benefits may be reduced for early payment – you can choose to waive any reduction in whole or in part in the case of flexible retirement but this will increase the Strain cost payable
  • the member will remain in the scheme and accrue further pension benefits, unless they opt out
  • any benefits paid as a result of flexible retirement are not subject to abatement under the administering authority’s abatement policy whilst the member remains with the same employer
  • We recommend that you obtain an estimate to determine any ‘strain cost’ that would be payable before flexible retirement is agreed

  Flexible retirement is not an automatic benefit in the Scheme so it’s your decision whether to offer this type of retirement to your members. For this reason, you should have a written policy in place to cover flexible retirement. Please refer to the Employers discretions page for more information on what needs to be included in your policy.

  Please note that we are unable to process flexible retirements where no policy exists.

  What you need to do

  • Complete the Leaver spreadsheet confirming the reason for leaving, along with the relevant pay details that will allow us to calculate the pension benefits.

  Please refer to our Employer Interfacing Guide to help you with the process.

• ill health retirement

  Please refer to our ill-health retirement guide.

• Death Benefits

  The Local Government Pension Scheme provides benefits on death for an active member, deferred members and pensioners.

  Pension Payable on death

  A Spouse’s pension can be payable based on 160ths of a member’s pensionable service.  This will continue for life even if the spouse re-marries.

  Pensions are also payable to civil partners and co-habiting partners based on pensionable service after April 1988.  Co-habiting partners will need evidence of living together/financially dependent on each other, but we will request that when we need to.

  Children’s benefits are also payable to any eligible child:

  • under age 18
  • aged between 18 and 23 who is still in full-time education
  • at any age if the child was still dependent on their parent for reasons of physical or medical incapacity

  Death Grant

  A death grant of 3 times the late members assumed pensionable salary is payable if a member dies whilst in active employment with you.

  There may also be a death grant payable for deferred members depending on when they ceased employment. If the member passes away after being in receipt of their pension for less than 10 years, then the balance of the 10 years pension will be payable as a death grant.

  The death grant can be paid to anyone who the member nominates on the Death Grant Expression of Wish form.

  What you need to do

  • If a member dies whilst in active employment with you, it is very important that you informed us as soon as possible so that the next of kin can be given details of benefits due as quickly as possible
  • Complete the Leaver spreadsheet confirming the reason for leaving, along with the relevant pay details that will allow us to calculate the death benefits. We will also require the assumed pensionable pay (APP) figure completing

• Employer Consent Retirement

  When a member aged 55 or over leaves with two or more years membership they are entitled to immediate payment of their pension benefits.  You can choose to waive early retirement reductions and/or choose to switch on the Rule of 85 for retirements between age 55 and 60 (only applicable to employees who joined the LGPS prior to 1 October 2006). You are required to have a policy on these discretions.