Increasing benefits
Additional contributions made whilst you are still working will boost your benefits package and increase the amount of money you have for your retirement. You can pay extra contributions as a tax-efficient way of topping up your benefits, although there are controls on the amount you can pay and there are HM Revenue and Customs rules on the amount of pension savings you can have before you become subject to a tax charge. More details of HM Revenue & Customs rules can be found at www.lgps.org.uk/lge/core/page.do?pageId=100776
For councillor members there is a dedicated increasing benefits page which is available in the councillors section of this website.
Why should I consider increasing my pension benefits?
Most of us look forward to a comfortable retirement and in order to boost our pension it is worth considering paying extra contributions, which is one way of increasing your income in retirement.
How can I increase my benefits?
There are a number of ways in which you can increase your pension benefits by paying additional contributions:
- Buying additional pension
- In-house additional voluntary contributions
- Repay a previous LGPS refund
- Employer awards of membership
- Contribute to a concurrent personal pension plan or stakeholder pension scheme
Are there any limits?
There is no limit on the amount of contributions you can pay, however, you can only receive tax relief on contributions up to 100% of your taxable earnings. Additionally, unless you have enhanced protection, there will be a tax charge if in any year, other than the year in which all your pension benefits have become payable, the value of your pension savings has increased in excess of the annual allowance or if, when you draw your benefits, the value of all your pension savings exceeds the lifetime allowance. Tax will be payable on any excess amount.
Even after paying your normal LGPS contributions, there will be a significant proportion of your taxable earnings that you can invest in additional pension or AVCs.
How can I increase my benefits?
Buying additional pension by the payment of additional regular contributions (ARCs)
You may wish to consider paying increased contributions into the Pension Fund itself by buying additional pension. Under the scheme rules you are able to buy additional pension in multiples of £250, up to a maximum of £5000. Contributions are calculated in accordance with a specified scale based on age and the length of time over which the additional contributions are paid. You can decide whether to simply increase your own pension or provide an increased dependants pension as well. The booklet 'PEN33 - Additional Regular Contributions' gives further details and can be found on the Scheme guides/leaflets page of this website.
How much will it cost to purchase additional pension benefits by paying ARCs?
An ARCs calculator is available to give you an idea of the cost of buying additional pension benefits.
In-house additional voluntary contributions (AVCs)
All local government pension funds have an in-house AVC scheme where you can invest money, deducted directly from your salary (or from councillors' allowances), through an AVC provider (often an insurance company or building society).
Your AVC fund should grow as it is invested and will be available later in your life to convert into an additional pension of your choice.
You decide how much you can afford to pay, up to 50% of your pensionable pay. Your contributions will qualify for full tax relief.
You can often choose which investment route you prefer and, on retirement, decide whether to buy an annuity (a pension) from an insurance company, or convert it into a top up LGPS pension (the latter option is not available to councillors).
Employees in England and Wales and Councillors ( from 6 October 2006 for employees in Scotland) : on retirement you may be able to take all or part of your AVC fund as a lump sum.
You can also pay in-house AVCs to provide additional life cover. Your LGPS membership already gives you cover of twice your pay if you die in service, but you can increase this or use it to provide additional benefits for your dependants in the event of your death in service. This may be subject to satisfactory completion of a medical questionnaire.
Your employer can contribute to your in-house AVC scheme at their own discretion. This is known as a shared cost AVC arrangement. The Shared Cost AVC facility is not available to councillors.
The Nottinghamshire County Council Pension Fund has two in-house AVC scheme providers, these are:
Prudential
Scottish Widows.
More information can be found on their websites, links to which can be found in the 'Related internet links' section of this page. You can also contact the pensions office about in-house AVCs, for details see the Contacting us page.
The booklet 'PEN13 - Topping Up Your Pension Benefits' gives further details and can be found on the Scheme guides/leaflets page of this website.
Repay a previous LGPS refund
If you ceased Local Government employment between 1st April 1974 and 31st December 1979 with less than five years membership in the LGPS and you claimed a refund of contributions, you may repay the refund plus interest. The repayment must be made within six months of rejoining the LGPS, or such longer period as your current and former administering authority may allow. This is an administering authority discretion, you can ask your current and former administering authorities what their policies are on this matter. Once the repayment has been made, the period of membership will again count for pension purposes.
Employer awards of membership
At their discretion, your employer can award you an additional period of membership to improve your retirement benefits. They will publicise their policy on this for your information. The authority cannot award extra membership to councillors.
Contribute to a concurrent personal pension plan or stakeholder pension scheme
You may, if you wish, be a member of the LGPS and make your own arrangements to pay contributions from the same earnings to a personal pension plan or stakeholder pension scheme.
If you choose also to pay into a personal pension plan or stakeholder pensions scheme, the contributions you make to it are invested in funds managed by an insurance company. The contributions made and any returns on their investment will, over time, accumulate in your own personal account.