There’s a common misunderstanding when it comes to transferring in other pension rights when you’re only working for the Environment Agency (EA) on a temporary contract. Many think it’s not worth their while if they’re expecting to work for the EA for less than 2 years because you need 2 years of pensionable service to qualify for a deferred benefit (we call this initial 2 years the 'vesting period’).
Normally, where a member joins the fund, but then leaves within 2 years, their contributions are refunded to them (less a free standing tax charge of 20%). Having a refund of contributions extinguishes the member's pension rights in the EAPF. However, if you choose to transfer in other pension rights from outside the EAPF within 12 months of joining, but still leave within 2 years, the 2 year vesting period may no longer apply.
This happens if you transfer benefits from:
- A stakeholder or personal pension arrangement, or
- An occupational pension scheme that the length of time you were a contributory member in that scheme, when added to your EAPF contributory membership, adds up to 2 or more years
When this happens you would become automatically entitled to a deferred benefit or pension in the EAPF whether you leave before, or after 2 years of joining.
We’ve also had cases where members chose not to transfer in pension within 12 months of joining because they started on a temporary contract and didn’t think they would stay – but then went on to stay working for the EA for years beyond. For some of these members if they had decided to transfer in their other pension rights when they joined the EAPF, their overall pension could have potentially been worth more than the separate entitlements they now hold – so it really is worth remembering that the LGPS rules state that transfers in must be done within 12 months of joining. And also consider what this could mean to your pension if you chose to ignore this opportunity.
The EAPF has the discretion to allow cases outside of the 12 month period, but only generally does so in exceptional circumstances. You can find out more about the discretions on the Easinet.