Taking your deferred benefits

We will write to you to offer you your deferred benefits a few months before the date they can be paid without reductions, but most people can take their deferred benefits sooner, or later. You may also be able to have your deferred benefits paid due to ill-health at any age.

This page explains:

• when you can release your deferred pension
• taking your pension on the grounds of ill-heath
• your payment options at retirement

The date your deferred benefits can be paid without reductions is called your Normal Pension Age. This date will be different depending on when you stopped paying in. If you stopped paying in after 1 April 2014, it will be the same as your state pension age, before this it is age 65.

If you have 85 year rule protections it will be earlier. You can check your Normal Pension Age through My Pension Online, or by viewing a recent Annual Benefit Statement.

A few months before you reach Normal Pension Age, we will issue you with a retirement pack to offer you your deferred benefits. This will be uploaded to your My Pension Online account if we hold an email address for you. You will be able to access the pack the moment it is ready. Otherwise, we will need to post this to you which can cause delays.

Most people will be able to take their deferred benefits from age 55 as long as we are provided with three months’ notice. If you take your deferred benefits before your Normal Pension Age, early retirement reductions will be applied to your deferred benefits as they will be in payment for longer. These reductions are shown in the early retirement table. The closer you are to your Normal Pension Age, the lower the reductions.

For more information about how reductions work, see Early retirement

If you were in the scheme before 1 October 2006, you will also have some additional protection which applies to deferred known as 85-year rule protection which means that some or all of your pension benefit could be paid earlier without reductions.

For more information, see The 85 year rule

You can get an estimate to take your pension showing any reductions or increases by using the benefit projector on My Pension Online.

You can perform as many estimates as you like. We can also supply you with an estimate. You are entitled to 2 pension estimates in a 12-month period. You just need to let us know what date you would like as your estimated retirement date. If this estimated date is close, we may issue you with a retirement pack. We cannot provide you with an estimate of ill-heath pension benefits.

At any age, you can apply to have your deferred benefits paid to you without reductions, on the grounds of ill health.

You would qualify for this if, after an assessment by an Independently Registered Medical Practitioner (IRMP), it is found that you are permanently incapable of performing the employment you had when you paid into your deferred benefit account. You would need to apply for this directly through your former employer and they are responsible for arranging the IRMP assessment.

The IRMP is a health practitioner qualified to carry out medical assessments for pension purposes. You will need to give your consent to the IRMP to view your medical records in order to carry out the review.

You can say no, but if you don’t consent it will be very difficult for the IRMP to make an assessment as they will not have enough information to be able to make a decision. The IRMP will look for evidence that you satisfy the criteria for ill-health. You can help the process by ensuring both your former employer and the IRMP understand your medical condition fully.

Sometimes, the IRMP may request to speak to you directly, either in person or over the telephone. But often the assessment is completed without the need for you to meet with them. The IRMP will use information provided by your GP, consultants and employer to make an assessment.

If you have other LGPS accounts, including any active LGPS account that you are still contributing to, you will need to be assessed for each. It is possible to qualify for ill-health retirement for one post and not another. This is because it all depends on what the job was and the nature of your condition.

How long the process takes depends on your individual circumstances. The IRMP needs to collect evidence of your condition and work history from your GP and consultants. We understand that this can be a difficult period of waiting, but you should expect the process to take some time. If you don’t hear anything after four weeks, you should contact your former employer for an update.

Ultimately, it is up to your former employer to decide if you should be entitled to receive payment of your deferred pension on the grounds of ill-health. The Pensions and Investments Team will not be informed of the outcome of any assessment for ill-health retirement until it is approved. If the retirement is not approved, we will not be contacted by your former employer.

If you are unhappy with the outcome of an assessment, you should discuss this with your former employer in the first place. If you are unable to agree on the outcome, you’re entitled to appeal the decision under the Internal Dispute Resolution Procedure (IDRP).

If the request for release of deferred benefits due to ill-health is approved, your former employer will send us the appropriate paperwork and we will provide you with a retirement pack.

When we write to you to offer you your deferred benefits, or you have contacted us to provide us with three months’ notice to take your deferred benefits, we will issue you with a retirement pack.

This will tell you how much your pension is worth and your payment options. You need to complete the forms fully to tell us how and where you would like your pension paid and return them along with a date of birth verification document. If you have an AVC fund, your AVC options will be included.

The retirement pack will usually include a set of forms and two calculation pages. These two calculations represent estimates of:

• Basic Benefit Package: The maximum annual pension you can take, with the lowest lump retirement grant
• Maximum Commutation Package: The lowest annual pension you can take, with the maximum lump sum retirement grant

The annual pension is what you will receive as a pension income each year for life. This figure is divided by 12 and paid to you monthly on the last working day of the month. It is counted as earned income and subject to tax.

The lump sum retirement grant is a tax-free one-off amount paid directly to you shortly after your retirement date. You can take up to 25% of your pension pot as a lump-sum. For every £1 of annual pension, you will get £12 as a lump sum. This is called commutation. This is why the calculation document showing the highest lump sum maximum commutation package will have a lower annual pension than the other calculation document.

If you have an automatic lump sum retirement grant with your deferred benefits because you paid into the scheme before 1 April 2008, you won’t be able to exchange this for annual pension, but you will be able to increase this to the maximum lump sum retirement grant of 25% by exchanging some of your annual pension.

When making a decision about lump sums, you should consider that the government limits the amount someone can receive in tax-free lump sums from all of their pensions to £268,275. This is known as the Lump Sum Allowance (LSA). If you exceed this limit, the excess would be taxed at your marginal rate. Find out more about Lump Sum Allowance.

These two calculation documents represent the two ways your pension can be paid, but you can also choose to take any amount of lump sum retirement grant between the minimum and the maximum and we will adjust the annual pension accordingly.

Here is an example of two calculation documents received with a retirement pack:

You can run projections on My Pension Online to test different commutation options.

You can also email us for an estimate: [email protected]

Some members will have the option of taking all their deferred benefits as a one-off lump sum. This option is known as a trivial commutation.

You must meet one of the following criteria to qualify:

• the value of all your pension pots, including those outside of the LGPS, must be valued at £30,000 or less. This is not a yearly amount; it is the pension pot value. We will request evidence of the value of your other pension pots
• you stopped paying into your deferred benefits after 1 April 2008 and the total value of your LGPS pension pot is £10,000 or less

In addition, though a trivial commutation doesn't count towards the Lump Sum Allowance, you must have enough Lump Sum Allowance remaining to receive payment of the trivial commutation.

If this is an option for you, it will be included in your retirement pack. If you have other LGPS accounts, they all must be trivially commuted at the same time.

The pension pot is calculated as: 20 x annual pension + lump sum + value of any AVC payments.

The rules for calculating the trivial commutation lump sum and how much tax should be deducted is determined by the government.

Members who have a Guaranteed Minimum Pension (GMP) included in their deferred benefits will only be able to trivially commute once GMP age has passed (60 for a woman, 65 for a man).

If you choose this option, you will be asked to sign a declaration confirming that you understand you are giving up all your deferred benefits in exchange for the lump sum and will not have an entitlement to any dependants’ pensions in the event of your death.

If you left the scheme before 1 April 1998, you won’t be able to defer receiving payment of your deferred benefits after your NPA. The pension must be put into payment. However, if you left the scheme after this date, you will be able to defer receiving payment until age 75. You will also receive an increase on your deferred benefits for taking them late. For more information about these increases, see Late retirement

If you are able to defer, this will be indicated on the retirement pack. You will need to complete the form and return it to us to let us know you don’t want to receive payment at this time. If we don’t hear from you within six weeks of the date on the retirement pack, we will assume you wish to defer payment at that point. You can choose to take your pension at any time after, but you will need to provide us with three months’ notice, so please factor this into your retirement planning.

The LGPS does not offer any flexible draw-down options. You will not be able to only take a portion from your pension pot or just the lump sum retirement grant. When you release your benefits, they are payable at the same time.

Retiring can be both exciting and stressful. We want to do everything we can to make the process as smooth as possible for you.

If you have any questions about putting your deferred benefits into payment, we are happy to answer them, but we cannot provide you with any advice on what decisions you should make. If you’re not sure what to do, you should obtain guidance from an independent financial advisor.

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