A deferred benefit is a pension benefit that is retained in the Local Government Pension Scheme (LGPS) until it becomes payable or is transferred out of the Fund. If you leave your employment or opt out of the Scheme with over three months membership before your pension benefits are due to be paid you will become entitled to deferred benefits.
These benefits consist of an annual pension and a tax-free lump sum. While secured in the Local Government Pension Scheme your benefits are guaranteed and attract cost of living awards, each April.
Deferred Information
What will happen if you choose to defer your benefits
Deferred Benefits - how they are calculated
Modification
Increase on deferred benefits
Further contributions into the Scheme
Transferring your benefits
Transferring your benefits to another pension scheme
Retirement
Receiving your deferred benefit at age 60
Reducing your pension to increase your lump sum
Lifetime Allowance
Payment of deferred benefits and you Lifetime Allowance
Ill Health
Ill health benefits
Death benefits
Death before benefits are paid
Further Information
Tracing a lost Pension
Keeping in contact - changing address
Newsletters
Your benefits will remain deferred within the LGPS until they become payable or until you decide to transfer them to another pension scheme.
Deferred benefits become payable at age 65 (unless you opt out to defer payment beyond that age), but may be put into payment at any age earlier than age 65 in the event if ill health, without reduction.
The calculation of your deferred benefits is based on your period of membership and your final pay.
Your period of membership is generally the number of years you have contributed to the Scheme (adjusted for part-time employees), plus any periods purchased with additional contributions and any credited to you from previous membership of another pension scheme or arrangement. Your final pay is generally the earnings on which you paid contributions in your last 12 months of membership or the better of the two previous years if this gives a higher figure.
This deduction is applied to your deferred pension if you had a period of Scheme membership (in the Local Government Pension Scheme) between 6 July 1948 and 31 March 1980 and left the Scheme before 1 April 1998. During this time, you would have paid a lower rate of contribution compared to that of your post April 1980 service. In order to make up the shortfall, the contribution difference is recouped from your pension on an annual basis (roughly £1.70 for every year of membership which falls between the dates shown). The deduction commences as soon as you reach state retirement age.
To protect their value your deferred pension and lump sum benefits are increased in line with the Retail Price Index, during the period of deferment and after your pension becomes payable. These increases are guaranteed and are not limited to a maximum percentage per annum, as in many other pension schemes.
This is not permissible unless you are currently employed with an employer who participates in the Local Government Pension Scheme.
This may be possible but you must first ask your current scheme's administrators if they will accept a transfer value. Regulations have recently changed whereby some schemes will only accept transfers if the member requests a transfer within 12 months of joining. You may also transfer your pension to a personal pension or stakeholder pension.
If you are interested in transferring the value of your accrued pension rights to another occupational pension scheme (outside of Local Government), to a personal pension plan, to a stakeholder pension scheme or to a buy-out insurance policy you can ask for a transfer value quotation to be provided (known as the 'cash equivalent' transfer value). Transfers can also take place to other Local Authority Funds, these are known as Interfund Transfers.
A quotation will be issued to you once we have all the relevant documentation to provide a quotation. The quote will be guaranteed for a period of three months from the date on which it was calculated (the 'Guarantee Date'). A written option to proceed with the guaranteed transfer value must be received within the three month guaranteed period in order for the original transfer value to stand.
This is possible but they may be subject to an early retirement reduction. Your statement will show the first date that your benefits become payable without a reduction. We will contact you shortly before your 60th birthday, detailing the options available to you, including the amount of pension and lump sum.
You can also elect to receive your benefits early, at or between the ages of 50 and 59 with your employer's consent, or at or after age 60, without employer's consent. Your pension may be subject to reductions if paid before age 65 to take account of early payment.
If you draw your deferred benefits on or after 6 April 2006, you will be able to exchange some of your pension to receive a bigger tax-free lump sum. You will be able to take up to a maximum of 25% of the capital value of your pension benefits as a tax-free lump sum or, if lower, 25% of the lifetime allowance less an adjustment for the value of any other pension benefits you are already drawing. The lump sum automatically paid on retirement as detailed above roughly equates to 15% of the capital value. Any amount you take as a lump sum above the automatic lump sum would be achieved by exchanging part of your annual pension for a one-off tax-free cash payment - for each £1 annual pension given up, you will receive £12 lump sum.
You may not reduce your pension to below your Guaranteed Minimum Pension
Your election to commute should be made in writing to the Fund before your benefits are paid. We will therefore contact you well in advance of your 60th birthday so we can provide you with further details about this option and the necessary paperwork.
Your lump sum will be increased and your pension reduced in accordance with any commutation election you make. Any subsequent widow's, widower's, civil partner's and children's long term pensions will be calculated by reference to your pension prior to any reduction to provide an increased lump sum.
From 6 April 2006 Her Majesty's Revenue and Customs (HMRC) introduced a new tax regime, which removed the existing tax restrictions and replaced them with taxable limits known as 'Tax Simplification'.
The new limits that were introduced are annual and lifetime allowances, they have been set at £225,000 (Annual Allowance) and 1.6 million (Lifetime Allowance) for the tax year 2007/2008.
As part of our processes we write to all members in advance of receiving payment of their deferred benefits and issue you with a Lifetime Allowance form and guidance notes.
Before this happens, you can help the process by obtaining details of all other pension savings and arrangements you may have. These include:
- Personal pensions
- Stakeholder pensions
- Free Standing Additional Voluntary Contributions (FSAVCs)
- Occupational pensions (including any other Local Government Pensions or Forces Pensions)
You do not need to declare on the form details of any:
- State Pensions
- Pensions Credit
- Widow or, Widower's pensions
- Any dependants pensions that will not become payable until after your deferred benefits are paid from the Cheshire Pension Fund
Please note that unless you have substantial pension benefits from a current and/or pervious pension arrangement it is unlikely that you will exceed the Lifetime Allowance. To comply with the tax regulations the Lifetime Allowance form once issued must be completed, signed and returned.
Until you have completed and returned the form to the Cheshire Pension Fund, payment of your benefit cannot be made. Failure to complete this form will result in late payment and a tax charge on all benefits including your lump sum.
You may apply to your former employer to have your benefits released early on ill health grounds. In such circumstances you should contact your previous employer's Personnel Department, who will arrange an appointment with their medical officer. The medical officer must certify that you are permanently incapable, until at least age 65, of performing the duties of your former employment.
Your retirement lump sum is paid as a death grant and will be automatically paid to your legal spouse / civil partner unless you have nominated a beneficiary. A widow's/widower's, civil partner's pension may also be payable, the pension is normally half of your deferred pension plus pension increases.
Children's pensions are payable to children who are under age 17 at your death although this can be extended while full-time education continues. Children's pensions starting after 6 April 2006 will cease by age 23 (unless the child has permanent disabilities) even if the child continues in full-time education.
| Status |
Benefit |
| Not legally married / civilly registered |
No spouse's pension payable |
| Female whose benefits were deferred before 6 April 1988 |
No Widower's or civil partner's pension payable |
| Married Female / All civilly registered members |
Half rate widower's / civil partner's pension based on all Scheme membership after 5 April 1988 |
| Married Male whose marriage took place before benefits were deferred |
Half rate widow's pension based on all Scheme membership |
| Married Male whose marriage took place after benefits were deferred |
Half rate widow's pension based on Scheme membership after 5 April 1978 |
The Pensions Tracing Service holds details of pension schemes, including the Local Government Pension Scheme, together with the relevant contact addresses. It provides a tracing service for ex-members of Schemes with Pension entitlements (and their dependants), who have lost touch with their previous employer due to a change in administrator or company name for example. All occupational schemes have to register if the pension scheme has current members contributing into their scheme or people expecting benefits from the scheme.
If you need to use the tracing service, write to:
The Pensions Tracing Service
The Pensions Service
Tyneview Park
Whitley Road
Newcastle Upon Tyne
NE98 1BA
Website: www.thepensionservice.gov.uk
It is your responsibility to inform us of any change of address as soon as possible. You can use the reply form that comes with your statement or you can write to us at:
Pensions Section
County Finance Office
Cheshire County Council
County Hall
Chester
CH1 1SG
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