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Aggregation

Aggregation – Combining your LGPS Accounts

Each time you start paying into the scheme under a new employment, we will open a new LGPS account, even if you have previously paid in and have a deferred benefits either held at South Yorkshire or another LGPS fund. However, if you have more than one LGPS account, you may still be able to combine them. This page explains who can combine LGPS accounts, how the process works and what you need to think about before you decide. Please refer to the aggregation glossary for additional information.

 

If you were entitled to a refund of contributions but you did not take it, and you later re-join the LGPS, we will automatically combine your earlier refund account with your later account. We will send you a confirmation letter when the aggregation process is complete. This is because you are no longer entitled to a refund when you start paying in again. If you take a refund, you are not entitled to, we will ask you to pay it back.

If your earlier LGPS account is deferred, you will 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 investigate this. If aggregation is an option for you, we will write to you with your options soon after your new LGPS account is set up. You then need to complete the election form and return it to us. The deadline for deciding is 12 months after starting your new employment, or 12 months after ceasing your employment if you leave a concurrent post. If you are already over this deadline when we write to you, or you have since left your new employment, the deadline is 3 months after the date on the aggregation letter.

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. We need to compare your pay in your old job with your pay in your later job to find out the impact. In some circumstances, combing LGPS accounts will work more like a transfer. You will 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.

Working out your benefits in the LGPS

Working out your LGPS benefits depends on when you built up your service in the scheme.

From 1 April 2014 onwards Every year you will build up a pension at a rate of 1/49th of the amount of pensionable pay you received in that scheme year if you are in the main section of the scheme (or half this rate of build up for any period you have elected to be in the 50/50 section of the scheme). This pension is then added to your pension account and revalued at the end of each scheme year so your pension keeps up with the cost of living.
Up to 31 March 2014 Final Salary Scheme (two different calculations)

  From 1 April 2008 to 31 March 2014 You receive a pension of 1/60th of your final pay. There is no automatic lump sum for membership built up after March 2008, but you do have the option to exchange some of your pension for a tax-free lump sum.

  Up to 31 March 2008 You receive a pension of 1/80th of your final pay plus an automatic tax-free lump sum of 3 times your pension.

Pensionable Pay

For benefits built up from 1 April 2014 your pensionable pay is the amount of pay on which you pay your normal pension contributions. However if during the scheme year you had been on leave on reduced contractual pay or no pay due to sickness or injury, or had been on relevant child related leave or reserve forces service leave then, for the period of that leave, your pension is worked out based on your assumed pensionable pay.

Final Pensionable Pay

The definition of final salary pay for benefits built up before 1 April 2014 remains the same as before the scheme changed from a final salary to a career average scheme on 1 April 2014.

Final salary pay is usually the pay in respect of (i.e. due for) the final year of scheme membership on which you paid contributions, or one of the previous 2 years if this is higher. The main differences to the pay used for career average benefits include:

  If you are working part-time when you leave the LGPS, or worked part-time at some point during your last year of membership, your final salary pay is the whole-time pay that you would have received if you had worked whole-time.

  It does not include non-contractual overtime.

There are further protections for final salary pay if your pay is reduced due to a period of sickness, if you are on maternity, paternity or adoption leave or if you pay is reduced or increases to your pay are restricted.

Remember, if your benefits are combined with your new active pension account and they buy an amount of earned pension in the career average scheme, any final salary benefits you had built up will no longer be worked out using the final salary calculations. Instead they will be treated as career average 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 will 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 will also include any cost-of-living adjustment, to ensure we are comparing like for like. Remember, the final pay, is not your actual take home pay. It is a full-time equivalent figure. The number of hours you work will not change this value.

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 will not be able to combine that account with a later account. Under the scheme regulations, they must always be held separately.

Only deferred pension accounts can be aggregated. You cannot combine two accounts if they are both active and if you have an LGPS account where the pension is already in payment.

You can’t combine two LGPS accounts if you left both employments on the same day. If you join the LGPS again later, a new account will be set up for you and the two earlier accounts can be combined with the new account.

If you have multiple LGPS accounts that can be combined, we will investigate 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. 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 will have the choice of which, if any, you want to combine your deferred benefits with.

It’s very important you inform us about LGPS accounts held with other funds. If you don’t tell us, we may give you the wrong options which can lead to delays and complications.

We will automatically aggregate your membership together but inform you that you have the right to keep separate benefits. If you are age 55 or over this means that you can elect for payment of this benefit immediately, albeit subject to usual early payment penalties. For those nearing age 55, you could also consider this in your pension plans for retirement, but anyone has this option, and it could be a medium to long term plan. To link to the 'TUPE transfers and aggregations' document, use the URL for the factsheets page.

It’s important that you act when you receive a letter about aggregating LGPS accounts. Your letter will explain to you that we will do if we don’t receive a response from you and this will depend one of the following two actions, this depends 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 will combine your LGPS accounts automatically under the regulations. Combining for some will mean earlier deferred benefits either increase or decrease.

If you decide not to aggregate, you cannot transfer the value of your deferred benefits to another pension scheme whilst you are still contributing to the LGPS or if you have less than one year to go before reaching your Normal Pension Age.

What things should I consider before deciding?

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.

If any of your earlier deferred benefits were built up before 1 April 2008, you will 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 will no longer have an automatic lump sum retirement grant. You will 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 will receive £12 in lump sum payment.

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.

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

You cannot receive payment of your benefits if you are 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 will need to be released at the same time.

If you are made redundant as an active member, and you are aged 55 or over, you will 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 (NPA) 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 will need to make a separate application to release your deferred benefits and there is no guarantee the application will be successful.

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 are still actively paying into the scheme) and you also have a deferred benefit, you will receive the highest of the two, not both. The death grant for active and deferred LGPS accounts is calculated differently. The death in service grant is calculated as 3 x 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

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 look up anything you don’t understand in the aggregation glossary. If you have any further questions, please get in touch. You could also book a member surgery so you can discuss the letter with a pensions officer. We will 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 new window suitably qualified to assist in decisions about pensions.