Leavers

If members opt out within three months of joining they’ll be treated as never having joined and you can refund their contributions through your payroll. They can’t opt-out before they start work, but they can do it on their first day by filling in an opting-out form and giving it to you.

You must not give members the opting out form. They can get the form from the member area of this site or by phoning or writing to us.

Add them to your monthly return to show them as a new member, and show them as a negative the next month when they have opted out and you have refunded their contributions (if any have been deducted). Don’t forget to recover any member and employer contributions you have paid to us.

Tell us about members who opt out under three months within 6 weeks of opting out.

Members need two years’ qualifying membership (the vesting period) to be entitled to pension benefits. 

If a member wants to opt out and they’ve been in the scheme for three months or more, tell them they need to get an opting out form from us and fill it in. They can get this form from the member area of the website.

Members are treated as normal leavers if they opt out after three months but before two years and are entitled to a refund. We'll pay the refund in this case and you should put a leaving date on your monthly return. When we have processed your monthly return we will send you an email to let you know that your exception reports are ready to access on the employer portal and you should complete the Leaver notification

Leaver notifications should be completed within 10 working days of receiving the exception report.

If the member already has an LGPS deferred benefit (or they are getting a pension) they will be awarded deferred benefits and won’t be entitled to a refund. They can transfer these benefits to another pension scheme if they want to.

If the member opts out or leaves after two years, they are entitled to deferred benefits and you should put a leaving date on your monthly return. When we have processed your monthly return we will send you an email to let you know that your exception reports are ready to access on the employer portal and you should complete the Leaver notification. 

Leaver notifications should be completed within 10 working days of receiving the exception report.

Members with membership before 1 April 2014 have their final salary benefits worked out on their final salary at the leaving date, which is final pay for the last 365 days, full-time equivalent for part-timers.

Example

• A member leaves on 13 August 2023.
• Their final pay period would be 14 August 2022 to 13 August 2023.
• The previous two anniversary years would be 14 August 2021 to 13 August 2022 or 14 August 2020 to 13 August 2021.

Where there is a break in membership in the final year (a break in employment or unpaid leave that the member hasn’t paid contributions for) we gross up their pay to a full year.

If the absence was because of illness or injury, any reduction or loss of pay is disregarded – in other words final pay is worked out as if the reduction or loss of pay hadn’t happened.

From 1 April 2008, members who have their pay cut, or in certain circumstances restricted, have 10 years to choose the best average of any consecutive three years in their last 13 years of membership. This applies even for pay cuts or restrictions after 31 March 2014 provided they were active members before 01/04/2014.

We still need to know members’ final pay (under the 2008 definition) if they have membership before 1 April 2014. Pension benefits for that membership are based on final pay.

The Local Government Pension Scheme (Benefits, Membership & Contributions) Regulations 2007 set out the definition of pensionable pay in Regulation 4.

Meaning of "pensionable pay"

1. An employee's pensionable pay is the total of

• all the salary, wages, fees and other payments paid to him for his own use in respect of his employment; and
• any other payment or benefit specified in his contract of employment as being a pensionable emolument.

2. But an employee's pensionable pay does not include

• (a) payments for non-contractual overtime;
• (b) any travelling, subsistence or other allowance paid in respect of expenses incurred in relation to the employment;
• (c) any payment in consideration of loss of holidays;
• (d) any payment in lieu of notice to terminate his contract of employment
• (e) any payment as an inducement not to terminate his employment before the payment is made.
• (f) the amount of any supplement paid
  - (i) by the Environment Agency; or-
  - (ii) to an employee whose employment is transferred on 1st April 2010, under a staff transfer scheme, from the Learning and Skills Council for England to a local authority or to London Councils Limited, in recognition of the difference in contribution rates between members of the principal civil service pension scheme and the Scheme; or (SI 2010/528)
• (g) any payment by way of compensation for the purposes of achieving equal pay in relation to other employees.
  (SI 2009/3150)

3. No sum may be taken into account in calculating pensionable pay unless income tax liability has been determined on it.

CPP is the total of the actual pensionable pay the member paid pension contributions on and/or the assumed pensionable pay (in either section of the scheme) in the scheme year. If APP has been calculated it replaces the CPP.

Always provide CPP separately for the main and 50/50 sections, which have different accrual rates.

Example – moving sections within the same year

A member is on a salary of £24,000 for the full scheme year and moves to the 50/50 section after three months. They will have already earned £6,000. They stay in the 50/50 section for five months and earn £10,000.

They then move back to the main section and earn another £8,000. So their cumulative pay at the end of the scheme year is £14,000 in the main section and £10,000 in the 50/50 section.

Employees can opt out and re-join as many times as they want.

Put them in the main section of the scheme when they rejoin, just like any new member, and complete the monthly return.

Like any new member, they can only join the 50/50 section once they’re a member. But if they tell you they want to join the 50/50 section before you close your payroll, they can in effect be in the 50/50 section from the first day.

Note - setting contribution rates: ignore reductions in pensionable pay due to sickness, child related leave, RFSL, or other absence from work at the point when the person opts in to the scheme, when you set their contribution rate.

Once you have determined the contribution rate you must notify the member of the contribution rate to be deducted from their pensionable pay and the date from which the rate is payable.

It is your decision how you notify the member i.e. on their pay slip, but the notification must contain a statement giving the address from which further information about the decision may be obtained and you must tell the member of the right to appeal to an adjudicator (i.e. the person you have appointed to consider appeals) against the decision.

The member must do this within six months of being notified of the initial decision or longer if the adjudicator allows. You must give the member the job title and address of the adjudicator and you must also tell the member that if they are unhappy with the adjudicator’s decision they have the right to ask the pension fund within six months of the adjudicator’s decision to undertake a further review of the decision.

Deferred benefits are normally payable at a members Normal Pension Age (NPA). NPA is linked to State Pension Age (but with a minimum of age 65). They can be paid earlier, or later than NPA. There are two ways they can be paid earlier and these are:

• early payment of deferred benefits at the members request, or
  early payment of deferred benefits due to permanent ill-health
• A member can choose to take early payment of their deferred benefits from age 55. They do not need your consent to draw their pension before their NPA.

If they choose to draw their deferred benefits before their NPA their benefits will normally be reduced to take account of early payment and the fact that their pension will be paid for longer. How much their deferred benefits are reduced by depends on how early the member draws them.

The reduction is calculated in accordance with guidance issued by the Secretary of State. The reduction is based on the length of time (in years and days) that a member retires early i.e. the period between the date their benefits are paid and their NPA.

If a member has built up pension in the LGPS before 1 April 2014 then protections are in place for their NPA that applies to those benefits. In addition, if they were a member of the LGPS on 30 September 2006, some or all of their benefits paid early could be protected from the reduction if they are a protected member.

You can agree to waive any reduction, this is a discretion and you should have a published policy on this.

Members can also request payment of their deferred benefits on the grounds of permanent ill health. They apply to you as their former employer for payment of their deferred benefits at any age, without reduction.

They would have to be permanently incapable of the job they were working in when they left you and they are unlikely to be capable of undertaking any gainful employment within 3 years of applying for the benefit or by their NPA whichever is the earlier.

The member should be assessed by an occupationally qualified doctor who has been registered with WYPF to do your medical assessments.

The doctor should complete form DBMPOST2014 – ill health certificate for deferred members who became deferred on or after 1 April 2014.

If the member is assessed as being permanently incapable by the Doctor, you should send us the medical form and confirmation of the date the benefits should be paid from i.e. the date of the medical.

If they do not take early payment of deferred benefits under either of the above two methods the deferred benefits will be paid from their NPA unless they opt to delay payment beyond that age.

If they draw their deferred benefits after NPA their pension will be increased by 0.010% for each day payment of their pension is delayed beyond NPA.

Deferred benefits must be paid before age 75. However, if their pension is not in payment at age 60 (women) / 65 (men), the Guaranteed Minimum Pension (GMP) element (if any) of their pension must be paid from that date (unless they are still in employment).

Note – taking benefits: members cannot take their benefits built up to 31 March 2014 separately from the benefits they build up from 1 April 2014. All of a member’s pension would have to be drawn at the same time.

If they choose to retire before their protected NPA their benefits built up before 1 April 2014 will be reduced to take account of being paid for longer.

Members of the LGPS on 30 September 2006 can have some or all of their benefits paid early and are protected from the reduction under what is called the 85 year rule.

What is the 85 year rule

The 85 year rule is satisfied if a member’s age at the date they draw their benefits and their scheme membership (each in whole years) add up to 85 or more.

If they work part-time, their membership counts towards the rule of 85 at its full calendar length.

Not all membership may count towards working out whether they meet the 85.

If a member has 85 year rule protection this continues to apply from 1 April 2014. The only occasion where this protection does not automatically apply is if they choose to voluntarily draw their pension on or after age 55 and before age 60.

Working out how members are affected by the 85 year rule can be quite complex, but this should help you work out the general position.

• Would not satisfy the 85 year rule by the time they are 65, then all their benefits are reduced if they choose to draw their pension before Normal Pension Age. The reduction will be based on how many years before Normal Pension Age (protected Normal Pension Age for pension built up before 1 April 2014 and new Normal Pension Age (linked to State Pension Age) for pension built up from 1 April 2014) they draw their benefits
  Will be age 60 or over by 31 March 2016 and they choose to draw their pension before Normal Pension Age, then, provided they satisfy the 85 year rule when they start to draw their pension, the benefits they build up to 31 March 2016 will not be reduced
• Will be under age 60 by 31 March 2016 and they choose to draw their pension before their protected Normal Pension Age, then, provided they satisfy the 85 year rule when they start to draw their pension, the benefits they’ve built up to 31 March 2008 will not be reduced. Also, if they will be aged 60 between 1 April 2016 and 31 March 2020 and meet the 85 year rule by 31 March 2020, some or all of the benefits they have built up between 1 April 2008 and 31 March 2020 will not have a full reduction

Member left before 1 April 2014

Deferred benefits are normally payable from age 65, although they can be paid earlier, or later. There are two ways they can be paid earlier.

Early payment of deferred benefits at the member’s request

A member can choose to take early payment of their deferred benefits from age 55. They do not need your consent to draw their pension before their NPA.

If they choose to draw their deferred benefits before their NPA their benefits will normally be reduced to take account of early payment and the fact that their pension will be paid for longer. How much their deferred benefits are reduced by depends on how early the member draws them.

The reduction is calculated in accordance with guidance issued by the Government Actuary from time to time. The reduction is based on the length of time (in years and days) that they retire early i.e. calculated as the period between the date the benefits are paid and age 65.

You can agree to waive any reduction on compassionate grounds.

Early payment of deferred benefits due to permanent ill health

The second method of early payment of deferred benefits is on the grounds of permanent ill health. The member must apply for payment of their deferred benefits at any age, without reduction if, because of their health, they would be permanently incapable of the job they were working in when they left and they have a reduced likelihood of being capable of any gainful employment within 3 years of applying for the benefit or by age 65, whichever is the earlier.

The member should be assessed by an occupationally qualified doctor who has been registered to do your medical assessments.

The doctor should complete form DBM – ill health certificate for deferred members who became deferred before 1 April 2014.

If the member is assessed as being permanently incapable by the Doctor, you should send us the medical form and confirmation of the date the benefits should be paid from i.e. the date of the medical.

If they do not take early payment of deferred benefits under either of the above two methods the deferred benefits will be paid from age 65 unless they opt to delay payment beyond that age. If they draw their deferred benefits after age 65 they will be paid at an increased rate.

Deferred benefits must be paid before age 75. However, if their pension is not in payment at age 60 (women) / 65 (men), the GMP element (if any) of their pension must be paid from that date (unless they are still in employment).