Leaving the Scheme
If you leave the Police Force whilst an active member of the 2015 Scheme, or if you choose to opt out of the scheme before retirement, there are several options available to you.
You can opt out of the 2015 Scheme at any time by completing an Opting Out declaration and sending it to your Police Force. If you do decide to opt out within the first 3 months of joining the Police Force, your declaration will be back-dated to the date you first became a member of the Scheme.
If you leave the 2015 Scheme with less than 2 years’ qualifying service and you have not transferred in any service, your pension contributions will be refunded. Conversely, if you build up 2 years or more qualifying service and then leave, your benefits will become Deferred.
If do you decide to leave the 2015 Scheme at any time in the future, your decision will take effect from the start of the next available pay period after your declaration has been received by the Police Force (or on any later date which the Police Force considers appropriate).
If you opt out of the 2015 Scheme, you will still be entitled to rejoin at a later date, although this may be subject to a medical examination at your own expense, to determine whether you will be eligible for ill-health benefits.
Refund of Contributions
If you leave the Police Force with less than 2 years’ qualifying service and without an entitlement to any other benefit under the 2015 Scheme, you may be entitled to the return of your pension contributions under the 2015 Scheme, less deduction of tax.
Like any leaver you may, alternatively, be able to ask for your 2015 Scheme benefits to be transferred to another pension scheme. 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 opt out of the 2015 Scheme after 3 months but before 2 years’ qualifying service, you will receive a refund of your pension contributions upon leaving the Police Force.
However, the exception to this is if you are permanently medically unfit as a result of an injury received in the execution of duty and your Police Force compulsorily retires you on the grounds of ill health; in which case you will be entitled to a pension under the 2015 Scheme.
You become a Deferred Member if you have at least 2 years of qualifying service and:
- you leave the Police Force before NMPA; or
- you leave the Police Force after reaching NMPA, but before reaching your SPA and you do not take a pension; or
- you opt out.
If you rejoin the Police Force or opt back in within 5 years, you will become an active Member again, otherwise you will remain a Deferred Member. Unless you transfer your 2015 Scheme benefits to another pension scheme, or a deferred pension comes into payment early, your Deferred Pension will become payable at your State Pension Age (SPA), which may change in the future.
A Deferred Pension will be increased in line with CPI under the Pensions (Increase) Act 1971 from the time that you leave the Police Force or opt out until the date at which your benefits become payable.
A member leaves the Police Force at age 50 with an accrued earned pension of £20,000 per year. When s/he leaves, his/her accrued earned pension will increase in line with CPI under the Pensions (Increase) Act 1971 and will be payable at his/her SPA).
Assume that by the time that s/he reaches SPA, his/her Deferred Pension has increased under the Pensions (Increase) Act 1971 by 40%. The member will therefore be able to retire at SPA with a pension of around £28,000 (£20,000 + 40%).
At retirement, the member has the option to commute pension for a tax-free lump sum, at a rate of £12 of tax-free lump sum for every £1 of pension given up. However, the commutation lump sum cannot be larger than 25% of the value of the member’s pension.
Re-Joining the Scheme
If you are returning to the Police Force after a gap in service (this does not include a career break) not exceeding 5 years, you may be able to build up future benefits in the 2015 Scheme.
If you once again become an active member of the 2015 Scheme after a gap in service not exceeding 5 years, your 2015 Scheme pension will be revalued as if during the gap in service you were an active member (i.e. revalued in line with the CPI + 1.25% per year), but as if you received no Pensionable Earnings.
If you once again become an active member of the 2015 Scheme after a gap in service exceeding 5 years, the pension you built up under the 2015 Scheme before your gap in service will be a Deferred Pension and will be revalued in line with the CPI each year from the date you began your gap in service. Pension built up during your current period of service as an active member will be revalued in line with the CPI + 1.25% per year while you remain an active member.
You are strongly advised to check your position regarding the protection of your accrued rights and other protections under the 1987 Scheme or the 2006 Scheme.
For the purposes of the Final Salary Link (used for calculating benefits under the 1987 Scheme or the 2006 Scheme), service under the 1987 Scheme or the 2006 Scheme will be taken to end when you began your gap in service, therefore you are strongly advised to check your position.
Transferring your Benefits
If you leave the Police Force or opt out of the 2015 Scheme before your NPA, you may have different options, depending on the length of your qualifying service. If your total qualifying service amounts to less than 3 months, your contributions will be refunded.
However, if your total qualifying service amounts to 3 months or more, but is less than 2 years, you can either transfer your 2015 Scheme benefits to another pension scheme or receive a refund of your contributions. If you have 2 or more years’ qualifying service, you can either transfer your 2015 Scheme Benefits to another pension scheme, or retain deferred benefits within the 2015 Scheme.
You may be able to transfer your 2015 Scheme benefits to another public service pension scheme, or another pension scheme which is registered with HM Revenue and Customs. The transfer payment will be in the form of a cash equivalent transfer value.
There are a number of issues to consider before making a transfer:
- You should be aware that there may be time limits that apply (e.g. 12 months to transfer after joining a club scheme).
- If you receive a refund of contributions, you are not entitled to a Deferred Pension and a transfer-out will be possible only if you repay the refund of contributions first.
- The transfer value may not necessarily buy the same amount of accrued pension in your new scheme – an estimate from your new scheme should provide an indication.
You are strongly recommended to seek Independent Financial Advice before deciding whether or not to transfer your benefits from the 2015 Scheme.
The Government has restricted 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 2015 Scheme, you are strongly recommended to take Independent Financial Advice before you make a decision.