A refund of the contributions you have paid may only be made if all of the following criteria apply:
- you have less than 2 years qualifying scheme membership (including service with another occupational scheme for which a transfer into the LGPS has been received)
- you have not had a transfer-in of previous pension rights from an arrangement that does not permit a refund of contributions eg a personal pension
- you have not re-joined the LGPS within a month and a day of ceasing the employment in respect of which you are claiming the refund of contributions
- you have not re-joined the scheme before the refund has been paid
- you have not previously transferred any LGPS benefits overseas
- you have no other LGPS benefits in England and Wales, whether deferred, paid as a pension or in active membership
If you receive a refund, having failed to disclose other LGPS benefits, the payment of the refund will ‘wipe out’ your entitlement to those other benefits.
There are other less common restrictions relating to an entitlement to a refund of pension contributions. We will let you know if any of these apply in your circumstance.
Deductions that can be made from refunds
Current legislation requires pension schemes to make certain deductions from refunds of contributions in respect of payments that have to be made on your behalf:
- When you were a member of the LGPS, you were contracted out of the State Second Pension (S2P), formerly the State Earnings Related Pension Scheme (SERPS), and as a result paid National Insurance contributions at a lower rate. This means you were not building up any benefits in S2P. To re-establish your pension rights in S2P, a premium must be paid by both yourself and your former employer. Your share, known as the Certified Amount, is deducted from your refund.
- All refunds are subject to a deduction for tax at the rate of 20% of the remaining balance after the state scheme premium has been deducted, regardless of whether you are a taxpayer or not.
The Fund has to pay the tax to the Inland Revenue. This liability is passed on to the member; it is not Income Tax and cannot be reclaimed.
Claiming a refund
If you wish to claim a refund of your pension contributions, please indicate your decision on the Option Form (LGPEN16) at the back of the Leaver Guide, and also complete the LGPEN 40 on the reverse.
This form enables us to pay the refund directly into your bank or building society account.
Please note, if requesting a refund of your pension contributions, you must not complete these forms until at least one month and a day after leaving the pension scheme.