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.
A refund and a transfer do different things. A refund pays eligible employee contributions back as cash after the applicable tax deduction and ends the benefits covered by it. A transfer uses the scheme's transfer value to buy rights in another pension; it is not the same amount or the same benefit as the refund.
Compare the actual refund and transfer quotations, the receiving scheme's terms, any guarantees and when the money could be accessed. Neither choice is automatically better for every member. Ask your fund whether you meet the qualifying period and leaving conditions, including any earlier pension rights that count towards them.
Transferring out to a DC pension
You can normally leave deferred LGPS benefits in the scheme. A transfer is another option where the scheme's timing and eligibility conditions are met.
What a transfer changes: transferring the cash equivalent value to a defined contribution pension gives up the LGPS benefits covered by that transfer. The receiving pot's value depends on contributions, investment performance, charges and withdrawals. Flexible withdrawals can exhaust it. The LGPS pension instead provides income and associated benefits under its scheme rules.
When advice is required: if your deferred LGPS benefits are worth more than £30,000 and you want to transfer them to a defined contribution scheme offering flexible benefits, you must take appropriate independent financial advice from an authorised adviser. This requirement does not mean every transfer between defined benefit schemes requires that advice. The fund also checks the transfer for scam risks. See the official LGPS transfer process.
The transfer quotation: the fund calculates the value under the applicable actuarial basis. A CETV is the amount available to transfer, not a ranking against commercial annuities or a promise that the receiving pension will provide more income.
For projections at different retirement ages, use the LGPS Calculator. The public-sector pensions guide explains how funded and unfunded scheme transfer rules differ.
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.
- •Transferring deferred LGPS benefits worth more than £30,000 to a defined contribution scheme offering flexible benefits requires appropriate independent financial advice. Different transfer routes have different conditions.
- •A DB-to-DC transfer gives up the LGPS benefits covered by it. Income from the receiving pot depends on how the money is invested and taken.
- •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.