LGPS: leaving — before retirement.
If you leave a local authority job before retirement, your LGPS benefits don't disappear. They stay preserved as a deferred pension, revalued by CPI until you draw them. This guide covers the rules, the refund option, and the transfer question.
- ▸The LGPS vesting period is 2 years of qualifying membership. Reach this and your benefits are preserved as a deferred pension.
- ▸Deferred LGPS benefits are revalued by CPI each year until you draw them.
- ▸If you leave with under 2 years of membership, you choose between a short-service refund of your own contributions or a transfer out — a refund is only an option if you have at least 3 months but under 2 years (under 3 months, refund is the only route).
- ▸LGPS deferred benefits can in some circumstances be combined if you rejoin LGPS at a later employer.
The vesting period: 2 years to qualify
The LGPS vesting period is 2 years of qualifying membership. Once you reach that threshold and then leave, your pension rights are preserved as a deferred pension when you leave.
What "preserved" means in practice: rather than losing your contributions, you retain a deferred pension entitlement that will be paid when you reach retirement age. The value of that entitlement is based on your LGPS accrual up to your leaving date.
Before the 2-year threshold is reached, your benefits are not preserved automatically. Instead you choose between a short-service refund of your own contributions or a transfer of value out to another pension arrangement. A separate sub-threshold sits at 3 months: with under 3 months of membership a refund is the only route, while between 3 months and 2 years you can take the refund or move the value to another scheme.
For context on how the LGPS accrual structure works, the defined benefit guide explains the key principles. Detailed projections are available through the LGPS Calculator.
Deferred pension: CPI revaluation each year
When you leave and your benefits are preserved, the LGPS does not freeze the pension at its current value. It revalues it annually by CPI (the Consumer Prices Index).
The revaluation happens on 1 April each year. If you leave with a deferred pension of £4,000 per year, and CPI for the previous September was 3%, your deferred pension becomes £4,120 the following April. This continues every year until you put the pension into payment.
Over a long deferral — say, leaving at 35 and drawing at 67 — the cumulative CPI uplifts can significantly increase the nominal value of your deferred pension. The real (inflation-adjusted) value remains broadly stable, which is the point: the revaluation is designed to preserve purchasing power, not to deliver real growth.
Deferred LGPS benefits also carry the same inflation protection once in payment. When your pension starts, it increases annually by Pensions Increase, which tracks the September CPI figure.
- ▸The LGPS vesting period is 2 years of qualifying membership. Members who reach this point have their benefits preserved as a deferred pension. [LGPS Member]
- ▸Deferred LGPS benefits are revalued annually by CPI until drawn. [LGPS Member]
- ▸A short-service refund is only available to members with under 2 years of LGPS membership. [LGPS Member]
Short-service refund: only if under 2 years
If you leave with under 2 years of LGPS membership, you do not qualify for a deferred pension. Your options are a short-service refund of your own contributions or a transfer of the value to another pension arrangement.
The refund amount is your own contributions, less tax. The tax deduction is 20% on the first £20,000 and 50% on any excess (this represents a recovery of the tax relief you received when the contributions were paid). The employer's contributions are not refunded — they stay in the scheme.
In most circumstances, transferring the value to another pension is the better choice than taking the refund as cash. Here is why:
- The transfer keeps the money invested and growing for retirement, rather than crystallising the tax deduction now.
- The tax deduction on the refund reduces the cash you receive — a member on the standard employee rate who contributed £2,000 receives £1,600 after the 20% deduction.
- If you join another pension in your next role, the transfer can often be combined with new contributions in the receiving scheme.
The only scenario where a refund might be the right call is if you are in acute financial difficulty and need the cash immediately, with no prospect of needing pension income later. Even then, the LGPS administering authority can advise on alternatives.
If you are approaching the 2-year membership mark, it is worth noting that crossing the 2-year threshold removes the refund option entirely and locks in a preserved deferred pension — which in most cases is the better outcome anyway.
Transferring out to a DC pension
Leaving your deferred LGPS pension in place is the default. You can also transfer the cash equivalent transfer value (CETV) to a defined contribution pension or a new employer's scheme, but there are significant considerations.
What a transfer involves: The LGPS administering authority calculates the present value of your future pension entitlement and pays it as a lump sum into your designated receiving scheme. The deferred pension is extinguished.
The key trade-off: The LGPS is a defined benefit scheme — it promises a guaranteed, inflation-linked income for life regardless of investment performance. A DC pension is a pot that grows or shrinks with markets, pays whatever it can fund, and runs out if you live long enough. The guaranteed income, inflation protection, and death benefits of the LGPS cannot be replicated in a DC pension.
Legal requirement: For any LGPS transfer above £30,000, you are legally required to take regulated financial advice from an FCA-authorised adviser before the transfer can proceed. This is not optional. In practice, most advisers will recommend retaining the DB benefit unless there are strong personal reasons not to.
Transfer value mechanics: CETVs from the LGPS are calculated on a basis set by the scheme actuary. The implied annuity rate in the CETV is often better than the equivalent commercial annuity — meaning you are, in effect, getting a better-than-market deal from the LGPS, and a transfer gives that up.
For projections of your LGPS deferred pension at different retirement ages, use the LGPS Calculator. For broader context, the public sector pensions guide covers the DB versus DC comparison in detail.
Rejoining LGPS later: can deferred benefits combine?
If you leave an LGPS employer and later join another employer that also participates in LGPS, you re-enter the scheme and start accruing new benefits. The question is whether your old deferred benefits combine with the new ones.
The answer: it depends on the fund.
The LGPS in England and Wales is administered by 87 separate local pension funds, not one central body. If you move from one LGPS employer to another within the same administering fund, the deferred benefits and new active benefits are usually combined automatically.
If you move to a different LGPS fund — for example, from a council in Yorkshire to a council in Kent — the two funds are separate. Your deferred benefits in the old fund remain as a deferred pension there. Your new benefits accrue in the new fund. You end up with two separate LGPS pensions, both payable at state pension age.
You can request a transfer of your old fund deferred benefits into the new fund if you prefer. This consolidates everything into a single pension. Whether to do this depends on whether the transfer calculation is favourable — ask both administering authorities for a transfer quotation and compare.
The administering authority for your former employer will send you a leaver statement within a few weeks of leaving, setting out your preserved pension value and your options. Keep this document — it contains everything you need to track the benefit.
- •LGPS transfers over £30,000 require regulated financial advice — this is a legal requirement.
- •A deferred LGPS benefit provides guaranteed income inflation-linked for life. This cannot be replicated in a DC pension.
- •Contact your LGPS administering authority for your specific deferred benefit statement.
This is factual information, not financial advice. If you're unsure what's right for your situation, speak to an FCA-regulated financial adviser.