Combining LGPS accounts
Each time you start paying into the scheme under a new employment, we’ll open up a new LGPS account, even if you have previously paid in and have a deferred benefit either held at Buckinghamshire or another LGPS Fund.
If you have more than one LGPS account, you may still be able to combine them. This page explains who can:
- who can combine LGPS accounts
- how the process works
- what you need to think about before you make a decision
If you have a refund account
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
- 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.
How the aggregation process works
‘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. You won’t usually need to contact us if you want to look into this.
If aggregation is an option for you, we'll write to you with your options soon 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.
Why combining LGPS accounts is not always the best option
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.
If you have LGPS accounts that we don’t know about
You must inform us about LGPS accounts held with other funds. If you do not tell us, you may:
- be giving the wrong options
- experience delays and complications.
You can tell us about other LGPS accounts by completing a membership form PDF, 730 KB and returning it to us.
If you have already started paying into another fund, you should inform them instead.
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.
If you opted out after 11 April 2015
There are some situations where aggregation is not possible. If you have a deferred benefit account because you opted out after 11 April 2015, you'll not be able to combine that account with a later account. Under the scheme regulations, they must always be held separately.
If you have two active pension benefit accounts or a pension already in payment
Only deferred pension accounts can be aggregated.
You cannot combine two accounts if:
- they're both active
- you have an LGPS account where the pension is already in payment.
- you left both employments on the same day
If you have more than two accounts
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 two active LGPS accounts beginning on the same day
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.
Why you should make a decision
It’s important that you act when you receive a letter about aggregating LGPS accounts. If we don’t receive a response from you, we'll have no choice but to do one of two things under the scheme regulations, depending on your dates of membership.
Either the LGPS accounts will be held separately, and you won’t have the opportunity to investigate combining them again. Or, we'll combine your LGPS accounts automatically under the regulations. As previously stated, combining for some will mean earlier deferred benefits either increase or decrease.
LGPS accounts can be combined in a few 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.
How we compare pay for final salary pension benefits
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.
Figures are for your earlier pension benefits only
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.
Things you need to think about
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
The value of your earlier deferred benefits
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.
Automatic lump sum retirement grants
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 you can take your deferred benefits without reductions
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.
Taking your earlier deferred benefits while still employed
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.
Making an informed decision
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