The regulations changing the Local Government Pension Scheme (LGPS) come into force on 1 April 2014.
Anyone who has opted out of the LGPS must rejoin the scheme if they want protection of the earnings link on any final-salary benefits that they have earned up to April (there may be some protection for those who opt back in within five years of opting out).
If the cost of contributions is a problem, the new regulations from April will allow members to pay half their normal contribution rate for half the pension. They need to fill in and return the forms to rejoin to their employer’s pension department before the end of February.
If they are not actively contributing to the scheme, any benefits earned before they opted out will fall outside the proposed five-year window of protection to opt back in, and will go up in line with prices – currently the Consumer Prices Index – rather than earnings.
Anyone thinking of paying additional voluntary contributions to maximise their tax-free lump sum payment when they retire should start paying the contributions before April.
If members choose to pay additional voluntary contributions after April, ththey are only likely to be able to take part of their additional voluntary contributions fund as a cash sum (currently 25% of the value) when they retire.
For the rest, they will have to buy extra pension at whatever the annuity rates will be in the future from a pension provider such as an insurance company.
Members – especially those near retirement – can pay additional voluntary contributions or buy extra LGPS pension if they can afford it.
They should ask their employer’s pensions department for details.
