Leaving the Scheme
You can opt out of the 2006 Scheme at any time. If you opt out in the first 3 months of your Police Force, your decision is back-dated to the date of your becoming a regular Police Officer. If you decide to leave the 2006 Scheme at any other future date, your decision will take effect from your next pay day after receipt of your notice to opt out.
Opting out of the 2006 Scheme will have a number of consequences, including:
- if you build up 2 years or more qualifying service and then opt out, you will be entitled only to a deferred pension, which would generally only be payable from age 65;
- if you die in service when you have opted out of the Scheme, NO lump sum death grant is payable;
- as someone who is not an active member of the 2006 Scheme, you will NOT be eligible for an ill-health pension if you are medically retired, although you will qualify for early payment of your deferred pension if you are assessed as permanently disabled for all regular employment.
Refund of Contributions
If you leave the Police Force with less than 2 years' qualifying service and without entitlement to any other award under the 2006 Scheme, the pension contributions that you have made may be refunded, less any deduction for tax.
You should note that a refund of contributions will only be of the contributions that you have paid, but a transfer value will reflect the total value of your pension benefits.
If you leave the service with less than 2 years’ qualifying service, then unless you are permanently disabled as the result of an injury received in the execution of duty, your pension award will thus be a lump sum equal to your pension contributions.
You are entitled to a deferred pension if you are under 55 and have at least 2 years to count towards qualifying service, and you either leave the Police Force or cease to be a member of the 2006 Scheme by opting out, without transferring your pension rights to another pension scheme.
The deferred pension will be based on your pensionable service and your final pensionable pay at the date on which you left the Force or opted out of the Scheme. It will be increased in line with the Consumer Price Index (CPI) from the time that you left the Force or opted out until the date at which your benefits become payable.
If you leave the Force or opt out of the 2006 Scheme before age 55, you can only be entitled to a deferred pension, regardless of how many years of pensionable service you have. Your deferred pension is payable from age 65 unreduced.
However, you can elect for your deferred pension to be paid earlier than age 65, but it will be reduced for early payment. You should be aware that such an actuarial reduction can be substantial (approximately 5% for each year, so that a deferred pension taken at age 60 might be reduced by 25%) and that the reduction to your pension will be permanent (although survivor benefits will not be affected). The reduction affects both the annual pension and the lump sum, which will be 4 times the reduced annual pension.
Your deferred pension will be paid early without reduction, if you have left the Police Force and you are permanently disabled of all regular employment.
Transferring your Benefits
If you leave or opt out of the 2006 Scheme before pension age, you have various options available to you. If your police service plus any linked qualifying service (i.e. qualifying service brought across from another pension scheme through a transfer value) amounts to less than 3 months, then your contributions will be refunded.
If your police service, plus any linked qualifying service amounts to 3 months or more, but your total qualifying service is less than 2 years, your choice is a transfer out of your pension rights to another pension scheme or a refund of your contributions.
If you have 2 or more years’ qualifying service (or if you transferred pension rights into the 2006 Scheme from a personal pension scheme) your choice is a transfer out of your pension rights to another pension scheme, or retaining deferred benefits within the 2006 Scheme.
There are a number of issues to consider before making a transfer:
- You must apply for a transfer payment within 6 months of leaving the police service or opting out of the 2006 Scheme (this is extended to 12 months for transfers to a public sector scheme) – these time limits may be extended at the discretion of the Police Force.
- You are not entitled to a deferred pension from the 2006 Scheme if you received a refund of contributions.
- You will not be able to have a transfer if you are within a year of reaching the age of 65.
- The transfer value may not necessarily buy the same length of service in the new scheme.
- The range and type of benefits offered by another scheme may be quite different from those offered by the 2006 Scheme.
The Government has prohibited any transfers from unfunded public service pension schemes (such as the Police Pension Schemes) into Defined Contribution Pension Schemes and other flexible benefit arrangements from 6 April 2015.
If you are thinking of opting out of the 2006 Scheme, you are strongly recommended to seek Independent Financial Advice before making your decision.