Opting Out

This leaflet provides information about opting out of theLocal Government Pension Scheme (LGPS)

Opting Out

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West Midlands Pension Fund

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It may be that you have decided to opt out before you started work or that you have reached this decisionafter being a member for a while –but we ask that you give this matteryour attention for a few moments byreading the enclosed information.

No one, least of all the Fund or youremployer, will force you to join theScheme. But if you elect not to be amember, you should understand theimplications for you and your dependants.

2 WEST MIDLANDS PENSION FUND OPTING OUT

I’m not paid enough

My ‘other half’ will look after me

It’s not safe enough

I’ve found a better deal elsewhere

It’s too far away to worry me

...and as administrators, we’ve listened to these andmany other concerns.

There are many reasons people give for not joining...or deciding to opt out...

Despite recent press speculation with regards to the funding of the LGPS or theway in which the benefits are calculated and at what age – the LGPS remainsone of the best occupational schemes in the UK.

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Your employer contributes to theScheme, funding two-thirds of thecost of providing this comprehensivepackage of benefits.

If you opt out you’ll lose out on your employer’s pension contribution.

Even though you could take out a personal pension plan in preference tomembership of the LGPS, it is very unlikely that the benefits from such a plan will be as good as the qualitybenefits provided by the LGPS. If you are opting out of LGPS membership due to advice you havereceived, you should ask for this advice in writing.

The LGPS is one of the bestoccupational pension schemes in theUK and, by being a member, you willenjoy the complete range of securequality benefits.

While a member of the Scheme, yourbenefits will continue to grow as yourmembership and earnings increase.You will have access to an annualstatement which will provide details of the benefits you have accumulatedto date. You’ll also have the facility toincrease your benefits by increasingyour contributions (contact us formore details). As and when you leavethe Scheme, it is the membership thatyou have accrued that will determinethe range of benefits to which you areentitled.

OPTING OUT WEST MIDLANDS PENSION FUND 3


– A pension based on your final pay

– Option to exchange part of your pension for a tax-free lump-sum paid on retirement

– Voluntary retirement from age 60

– Retirement from age 55 with your employer’s consent

– An ill-health pension from any age

– Redundancy cover from age 55

– A death-in-service lump-sum of three times your final pay

– A widow's, widower's, civil partner’s or nominated cohabiting partner’s pension

– Children's pensions

– The ability to increase your benefits by paying extra contributions, including AVCs

– The index-linking of benefits to ensure that they keep pace with inflation

The benefits of LGPS membership



A refund of your contributions ispayable if you have less than threemonths in the Scheme, and you arenot ceasing membership on or afterthe start of the tax year during whichyou attain state pension age. A refundis not payable if you re-enter the LGPSbefore claiming a refund to which youwere eligible.

A refund is not available if your membership includes a transfer from another pension scheme.Refunds are not permitted if youhave another period of LGPS membership that entitles you to deferred benefits or if you are in receipt of an LGPS pension from an earlier period of employment.You cannot claim a refund if youhave any other periods of LGPSmembership.

A refund of contributions is subject tothe following deductions:

a) An amount equal to your share of astatutory payment known as a contributions equivalent premium(CEP), which must be paid to theDepartment for Work and Pensions(DWP) to secure the preservation ofyour pension rights in the state second pension (S2P), formerlyknown as state earnings-relatedpension scheme (SERPS). This deduction doesn’t apply for womenwho have been paying reduced ‘E’ rate national insurance contributions, and

b) a tax deduction currently equal to 20% of the remaining balance,after the deduction of any CEP.

If you do not wish to take a refund ofyour contributions you can considertransferring your LGPS pension rights.If you are at present uncertain as towhether you will transfer your pensionrights or receive a refund you must letus know within 12 months of optingout that you wish to defer your decision. If, ultimately, you do not rejoin the Scheme or you do not electto transfer your accrued pensionrights, your only option is to receive arefund of your contributions.

Leaving the Scheme with less than three months’ membership



Deferred benefitsIf you have at least three months’membership in the LGPS you will bepleased to know that you qualify fordeferred benefits; which means thatyou have the right to be paid benefitswhen you reach normal retirementage. Deferred benefits consist of ayearly pension (which is fully index-linked to protect its value against priceinflation). If you have membershipprior to 1 April 2008, then you are entitled to an annual pension and tax-free lump-sum.

Note: A refund of contributions is no longer payable.

Payment of deferred benefitsYour pension normally becomespayable after leaving your job whenyou attain age 65; however, you canchoose to defer benefits until age 75.

Pension increasesAll benefits are fully index-linked bothbefore and after they have beenbrought into payment. Increases aremade in line with the consumer pricesindex (CPI) and are not limited to amaximum of 5% as in many otherpension schemes.

Early payment of benefitsBenefits can be paid from age 55, subject to your former employer’sconsent.

If you were paying into the LGPS on31 March 2008, you may have a protected earlier retirement age whenyou can request early payment of yourdeferred benefits.

Please refer to an All About YourScheme booklet for further details asbenefits may be reduced if you electto receive them prior to age 65.

Benefits payable – how your pension is calculated

Your annual pension is calculated like this:

x x =Final pensionablepay

1/60 Period ofmembership

Yearlypension


Leaving the Scheme with three months’ or more membership


Benefits not subject to a reductionmay be payable (at any age) if you become permanently ill, and the illness prevents or would have prevented you from continuing withyour local government employment. In these circumstances, you shouldapply to your former employer whomay authorise the early payment ofyour deferred benefits.

Unreduced benefits can also be paidearly on compassionate grounds fromage 55. Applications must again bemade to your former employer, notthe Fund.

Dependant’s benefitsShould you die before your deferred benefits come into payment, the death grant payable is five times yourannual deferred pension.

A pension will also be payable to yourspouse, civil partner or nominated cohabiting partner in appropriate circumstances. You should ensure thatyou have completed and updated, as appropriate, any nomination form issued to you.



If you are interested in transferring thevalue of your accrued pension rights toanother occupational pension scheme(outside of local government), to a personal pension plan, to a stakeholderpension scheme or to a buy-out insurance policy you can ask for a

transfer value quotation to be provided(known as the ‘cash equivalent’ transfervalue). Under provisions introduced bythe Pensions Act 1995, a quotationmust be guaranteed for a period ofthree months from the date on whichit was calculated (the ‘guarantee date’).


Transfer of pension rights

Personal pension plans/section 32 buy-out bonds/stakeholder pensions


WARNING

A personal pension representativemust have an extremely good reason before recommending that anyone should take out a personal pension plan and/or transfer their accrued pensionrights, in preference to the qualitybenefits that could be provided as a member of the LGPS.

Unfortunately, during recentyears, many members have received wrong advice about leaving the Scheme. This mayhave resulted in the misselling of a personal pension plan.


Most financial advisers/salesrepresentatives earn commission forthe pension products they sell. Any commission payable is offsetagainst your plan – ie, you pay for it. You should ask any adviser that produces information for you to confirm these details, if appropriate.The money you put into these plans isoften invested in the stock market, sothe value of your investment can godown as well as up.

The amount of pension payable fromthese plans cannot be determined untilthe day you retire, and that will be oflittle use to you if the stock marketcrashes on the same day. Unlike theLGPS, there are no guarantees.

Also, insurance companies, banks,building societies, etc, will charge administration costs, policy fees andother expenses to your plan. The costsof administering the LGPS are met byyour employer, so taking out a personal

pension plan may end up costing youmore.

You will have no legal redress onWolverhampton City Council or yourformer employer if your personalpension plan or section 32 buy-outbond does not match your expectations.

Further optionsIf you cease your current employment,further transfer options become available. For instance, you may transfer your accrued pension rights to another LGPS fund or to anotheremployer’s pension scheme.

Transfer informationIf you require any further informationabout transferring your accrued LGPSrights, please contact Customer Services on 0300 111 1665.



Notes


Data ProtectionTo protect any personal information held on computer, West Midlands Pension Fundis registered under the Data Protection Act 1998. This allows members to check thattheir details held are accurate. The Fund may, if it chooses, pass certain details to athird party, if the third party is carrying out an administrative function of the Fund, for example, the Fund’s AVC provider. Members who wish to apply to access their data on Data Protection Act grounds should contact the Fund’s Data Protection Officer on (01902) 554498, via email at [email protected]

This authority is under a duty to protect the public funds it administers, and to thisend may use information for the prevention and detection of fraud. It may also sharethis information with other bodies administering public funds solely for these purposes.

Information produced by the Fund can be made available in several formats including large sight text, Braille and several community languages. If you have any special requirements or would like to speak face to face with a member of staff, please contact us to arrange how we may best meet your needs.

Please remember that special requirements may take a little longer than normal to organise, but you have our assurance that we will do our best to ensure you receive the information in the most appropriate and efficient manner possible.



Write to us at:

West Midlands Pension FundPO Box 3948WolverhamptonWV1 1XP

Email us on:

pensionfundenquiries@ wolverhampton.gov.uk

Telephone Customer Services on:

0300 111 1665Visit our website at:

wmpfonline.com

Fax us on:

0845 230 1565Minicom/Typetalk:

01902 554607

Send us a text on:

Text WMPF + your message to 60066Standard short code network charges apply

Lines are open during the following times:8:30am to 5.00pm Monday -Thursday8:30am to 4.30pm Friday

Calls may be monitored for training purposes

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Contact information

The LGPS is currently undergoing consultation on a new-look Schemefrom 1 April 2014. For more details of how the new LGPS will workfrom that date and to find out how you can comment on the proposals, see the Fund’s website.


Documents

Opting Out