Combining LGPS accounts

Each time you start paying into the scheme under a new employment,a new LGPS account will be opened, even if you previously paid in and have a deferred benefit either held at Buckinghamshire or another LGPS Fund.

What happens to your previous pension account when you start a new employment in the LGPS depends on your dates of membership.

This page explains:

• who can combine LGPS accounts
• the actions you need to take
• how the process works
• what you need to think about before you make a decision

When you start a new employment under the LGPS, you must inform your LGPS Fund about any other LGPS accounts held with other Funds. You must do this within your first 12 months of joining.

If you don’t, you may:

• be given the wrong options
• experience delays and complications.
• lose the opportunity to combine pension benefits

Once we receive the membership form, we will contact your previous LGPS provider to obtain the details we need to investigate the possible transfer. We will then be able to write to you with your options.

You only have up to 12 months after joining the LGPS in your current employment to transfer other LGPS membership into your Buckinghamshire pension. After that point you would require your employer’s permission, so it’s important you act as soon as possible if you want to investigate this.

If you have already started paying into another fund, you should inform them of your Buckinghamshire LGPS membership.

If you paid AVCs in your previous LGPS Fund, and you decide to combine accounts, you would normally need to set up a new AVC Fund with one of our providers and transfer the value of your AVCs as well. You should declare this on the membership form.

If you were entitled to a refund of contributions but you did not take it, and you later re-join the LGPS, we'll:

• automatically combine your earlier refund account with your later account even if it's held in another pension fund
• send you a confirmation when the aggregation process is complete

This is because you’re no longer entitled to a refund when you start paying in again. If you take a refund you're not entitled to, we'll ask you to pay it back.

For more information about refund entitlement, see Leaving your LGPS employment before you retire.

There are some situations where aggregation of an earlier pension account is not possible, these are:

• you opted out of the deferred pension account after 11 April 2015
• you left both employments on the same day
• you have two active pension benefit accounts that you are currently paying into
• your pension account is already in payment
• you are receiving the Guaranteed Minimum Pension (GMP) from a deferred benefit

‘Aggregation’ is the term we use for the process of combining LGPS accounts.

If your earlier LGPS account is deferred, you'll have a decision to make about combining those deferred benefits with your new LGPS account. If you paid your earlier pension account before 1 April 2014, or it was held at Buckinghamshire, you won’t usually need to contact us if you want to look into this.

However, if you paid into the LGPS in another LGPS Fund, and you stopped paying into the account before 1 April 2014, you must complete an LGPS membership form for us to investigate this on your behalf.

If aggregation is an option for you, we'll write to you with your options after your new LGPS account is set up. You then need to complete the form to provide us with your decision and return it to us with a photocopy of your date of birth verification.

The deadline for making a decision is 12 months after starting your new employment. If you're already over this deadline when we write to you, or you have since left your new employment, the deadline is 2 months after the date on the aggregation letter.

You may think it makes sense to combine LGPS accounts because it seems neater but combining won’t be the best decision for everyone.

The regulations for aggregations are complicated. The value of your earlier deferred benefits could increase or decrease and the date they are paid without reductions could also change if you choose to aggregate. Your lifestyle and personal retirement plans may also play a role in the decision.

When you receive our letter, it’s really important that you read through your options and make a decision. If we don’t hear back from you, depending on your particular circumstances we will either:

• automatically combine pension benefits, or
• leave them separate and you will not be able to investigate the option again

If you have multiple LGPS accounts that can be combined, we'll look into combining all of these. This could mean you receive more than one letter about combining LGPS accounts and they may arrive either together, or we may process them in a set order. We'll include a payroll number so that you can identify which employment each letter relates to.

You may choose to combine one and not another. On each occasion, you should read the letter thoroughly and consider each decision based on its own merits.

If you have a deferred benefit and two active accounts beginning on the same day, you'll have the choice of which, if any, you want to combine your deferred benefits with.

LGPS accounts can be combined in different ways depending on the dates of membership. For example, if both employments began after 1 April 2014 and there is not a five-year gap between them, it will simply be a case of moving one pot over to another without any impact on the value of your earlier deferred benefits.

On the other hand, if your earlier deferred benefits include membership before 1 April 2014 (final salary benefits) the value of your deferred benefits may change if we combine them. If may even change the date your pension benefits can be paid without reductions. We need to compare your pay in your old job with your pay in your later job to find out the impact. The next paragraph explains how we do this.

In some circumstances, combining LGPS accounts will work more like a transfer. You'll be offered the chance to use your earlier deferred benefits to buy earned CARE pension in your later LGPS account.

The options will be detailed on your letter and each will have different considerations.

If deferred benefits include final salary membership (pension benefits built up before 1 April 2014) you may have the option of keeping the final salary link, even if you combine them. We’ll use a final salary figure in your later employment and compare it with the final salary figure that was used to calculate your deferred benefits. We’ll also include any cost-of-living adjustments, to ensure we are comparing like for like.

Remember, the final salary figure, is not your actual take home pay. It’s a full-time equivalent figure. The number of hours you work will not change this value.

Find out How we calculate your deferred benefits

If you're provided with figures on the letter, they are for your earlier deferred benefits only. The value of your current, or later, pension account is not included anywhere on the letter. Whether you decide to combine or leave your pension benefits separate, the figures we have quoted are in addition to any pension benefits built up in your later LGPS account.

Your letter will provide you with your options and point out the things you need to consider, but we cannot tell you if it is best to combine or not. Here are some of things you should think about before you decide. We recommend you obtain independent financial advice where possible, for more information see Get help with decisions about your pension

If the value of your earlier deferred benefits will change when they are aggregated, your letter will contain comparison figures. It will be easy to see if they are predicted to increase or not but remember, we have used the current full-time equivalent salary, we cannot tell what will happen in the future.

If your full-time equivalent salary increases, these figures could go up. If your full-time equivalent salary drops, these figures could go down. If you don’t have any figures quoted on your letter, then the value of your deferred benefits will not change if you combine them.

If any of your earlier deferred benefits were built up before 1 April 2008, you'll have an automatic lump sum retirement grant. This is a one-off tax-free payment made after you retire. In some scenarios your annual pension may increase if you combine them, but you'll no longer have an automatic lump sum retirement grant. You'll still be able to take a lump sum retirement grant when you retire by exchanging some of your annual pension to create lump sum. For every £1 of annual pension you give up, you'll receive £12 in lump sum payment.

For more information see Early retirement

The date your deferred benefits can be paid without reductions is called your Normal Pension Age (NPA). This date has changed over the years in the scheme regulations. Combining LGPS accounts may mean the NPA for your earlier deferred benefits will change.

For example, let’s say an earlier employment ended before 1 April 2014 and the deferred benefits are payable at age 60 without reductions. There is a gap of 5 years or more between this employment and the later employment, so the only option to combine these two LGPS accounts is through the purchase of earned CARE pension. The annual pension will increase if combined, but, the NPA will change to 67. The (now combined) deferred benefits could still be released at 60, but there would now be reductions payable on them. In this scenario, the consideration would be whether it was better to have a higher pension paid later, or a lower pension paid earlier.

For more information, see The 85 year rule

These kinds of decisions are highly personal and will require careful consideration.

You cannot receive payment of your benefits if you're still working in the employment for the active LGPS account, even if you have opted out, but you can receive payment of any deferred benefits held in a separate LGPS account. Once your LGPS accounts are combined, they’ll need to be released at the same time.

Don’t forget annual pension is counted as earned income and could increase how much tax you pay. You can find out more about income tax on the tax office (HMRC) website.

If you're made redundant as an active member, and you're aged 55 or over, you'll be entitled to immediate payment of your benefits without early retirement reductions.

If you have combined your LGPS accounts, it will apply to all your benefits. If you chose to keep your LGPS accounts separate, it will only apply to your active LGPS account, and any deferred benefits released before Normal Pension Age would be subject to early retirement reductions.

If you retire due to ill health in your current employment, only the LGPS account in respect of that record will be released.

If you leave your LGPS accounts separate, you'll need to make a separate application for each account.

For more information on releasing a deferred pension on the grounds of ill-health, see Taking your deferred benefits

There is a death grant payable for a nominated person or charitable institution for deferred and active LGPS accounts. If you die in service (while you're still actively paying into the scheme) and you also have a deferred benefit, you'll receive the highest of the two, not both.

The death grant for active members and deferred LGPS accounts is calculated differently. The death in service grant is calculated as 3 times your actual pensionable pay. A death grant for a deferred member is calculated as 5 x your deferred annual pension if you left after 1 April 2008, or the equivalent of the automatic lump sum if you left before 1 April 2008.

For example, if the annual pension for a deferred benefit was £15,000 per annum, the death grant would be £75,000 (5 x £15,000, the deferred annual pension). If the annual pensionable pay for a later post is £20,000 per annum, the death in service grant would be £60,000. So, in this case, keeping LGPS accounts separately would mean a higher death grant.

There are also pensions payable to a qualifying spouse or partner and these can be paid from both the deferred and the active LGPS account. The value of these may change if the accounts are combined. Combining them may increase these amounts, even if the death grant decreases.

You can find out what death grants and partner’s pensions will be payable on each of your LGSP accounts by running an estimate on My Pension Online.

We understand pensions can be complicated. We want to help you as best as we can by ensuring you have the information you need to make an informed decision and you understand the options available to you. Read your letter carefully and if you have any further questions, please contact us

We'll do our best to explain the choices, but we cannot offer you any advice or decide for you.

If you need help deciding, we recommend that you get financial advice from a registered independent financial advisor suitably qualified to assist in decisions about pensions.

For more information, see Get help with decisions about your pension