Considering opting out?
The rising cost of living is giving lots of people new money worries.
We understand that making contributions to a pension may seem like an unnecessary luxury and that some of you may be considering opting out of the scheme.
If this is something you are considering, make sure you understand what the LGPS gives you:
- A secure pension for life, with annual adjustments in line with the cost of living.
- A tax-free lump sum when you retire
- Ill-health retirement if you have to stop work due to a serious illness.
- Redundancy retirement benefits if you’re made redundant or retired on business efficiency grounds after age 55.
- Death benefits for your family – including a partner’s pension and children’s pensions PLUS a cash lump sum of three times your pay, paid to the person of your choice.
On top of this, your employer pays a large contribution on your behalf (more than double, sometimes triple what you pay) into your pension, and therefore contributes substantially towards your standard of living in retirement. We recommend you take financial advice before you opt out of the LGPS.
Reducing your contributions
Did you know you can reduce your contributions and stay in the scheme?
You have the option in the LGPS to pay half your normal contributions in return for half your normal pension. It's called the 50/50 section of the scheme and is designed to help members stay in the scheme when times are financially tough.
You retain full life assurance and ill health cover when you are in the scheme's 50/50 section. You’ll need to speak to your employer if you would like to move into the 50/50 section, they can give you a form to complete.
Visit the LGPS member site to see how your contributions might be affected if you move into the 50/50 section.
During this crisis, it’s possible that pension scams will increase.
To protect yourself you should:
- reject offers that come out of the blue
- beware of adverts on social media channels and paid-for or sponsored adverts online
- use the Financial Services Register and warning list to check who you are dealing with
- not click links or open emails from senders you don’t know
- avoid being rushed or pressured into making a decision
- not give out personal details, bank account details, your address or information about your existing insurance policies, pensions or investments.
Be ‘scam smart’ - find out more about how scammers work and get advice on the FCA website.
Help for pensioners on lower incomes
There is a separate welfare benefit for pensioners called Pension Credit. Pension credit provides extra income for people over State Pension age on lower incomes.
In April 2022, it was estimated that about 850,000 households are missing out on Pension Credit because they think it isn’t meant for them. Pension Credit can be worth up to £3,300 a year and you may be eligible even if you have your own home or have savings.
Even if you find out you are only entitled to a small amount of pension credit, it is worth claiming. This is because it may help you qualify for other benefits, such as help with heating bills, housing costs, NHS dental care, council tax, and if you are over 75, a free TV licence.
Use the online calculator to check if you are missing out on Pension Credit – it only takes a few minutes. Or call 0800 99 1234.
Where to find help and advice
- Look at the cost of living FAQs on the LGPS website.
- If you are considering opting out of the scheme, you can find a financial adviser – many advisers offer the first session for free. Make sure you check the box that says 'I want advice on a Defined Benefit pension” when looking for an adviser using this service.'
- Have a look at the government-affiliated website for lots of generic information about pensions
- Ask your employer to arrange a talk from one of the Pensions Team. We are happy to talk to a group or run a pensions clinic on your site if lots of your colleagues also have questions and concerns about the LGPS.
- If you are worried about debt, visit the moneyhelper website