Section 13 - Opting out of the LGPS

Any Scheme member can opt-out of the Local Government Pension Scheme (LGPS) at any time, on or after their employment start date. They need to complete an opt-out form. Alternatively, they can contact Southwark Pension Services for a form using the details on their contacts page.

As you are the member’s employer, you must not issue the member with an opt-out form as this can be seen as coercion not to join the scheme, which in turn could incur a fine from The Pensions Regulator (TPR).

Employees cannot complete an opt-out form before starting employment, as all employees have to be brought into the Scheme on their first day of employment. They can complete an opt-out form on their first day if they so wish, but they will still have to pay the first month’s contributions. They cease to be an active member from the next available pay period after the date the completed form is received by your Payroll Section or Human Resource department.

If an employee has opted out within three months of joining, their pension contributions (less statutory deductions for tax), must be refunded through your payroll. The employee is then treated as having never joined the Scheme in relation to that employment and opt-out election.

If they opt-out with more than three months’ but less than two years’ membership in the LGPS, including any previous transferred in membership – they can still receive a refund of contributions, less the statutory deductions for tax and National Insurance. Any refund due to these members, is paid by the pension administrator, Southwark Pension Services.

Once the opt-out form has been processed by your payroll, it must be sent to Southwark Pension Services by post using the same contact details to confirm the member has now ceased their membership of the Scheme.

Employees who have opted out of the Scheme can choose to opt back in at any time in the future (unless they are employed by a designating employer/admission body and are no longer designated for membership). A person is free to opt-out of the Scheme and re-join as many times as they wish. A member can also elect for the 50/50 section of the Scheme. Read Section 4 – The 50/50 section for members for more.

If an employee who has previously opted out of the LGPS, with two or more years’ membership in the Scheme, they will have been granted deferred benefits. If the employee then decides to re-join the Scheme at some point in the future, (whilst in the same employment), they can do so by completing and returning a starter form to you so that you can enrol them into the LGPS, and begin deductions of both employee and employer contributions. However, they will not be able to join the deferred benefits with their new active account – these must remain separate and they will have two separate benefits in the Scheme.

If an employee has opted out the LGPS, you should be aware that you are required by law to re-enrol them back into the LGPS in certain circumstances. They will need to be automatically - enrolled back into the LGPS on your designated automatic enrolment date, or automatic re-enrolment date, unless they are an exception. Read Section 5 - Automatic enrolment (AE) for more.