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Increasing your pension benefits

Boosting your pension pot

This information is for those currently paying into the scheme (active members).

If you have left the scheme, you won’t be able to pay any more into your pension. For more information see If you're are no longer paying in

If you’re looking for ways to boost your pension pot, you could consider:

  • buying back lost LGPS pension due to time away from work
  • paying extra towards your pension

Buying back ‘lost’ pension

If you are away from work and your pension contributions reduce, it could mean that you are not building up pension for that period. You may be able to make up the pension you lost by buying it back when you return to work.

To check how leave affects your pension, see time away from work.

Paying extra towards your pension

If you'd like to save more towards your retirement, you could consider paying extra towards your LGPS pension.

There are two tax efficient ways in the LGPS to increase your pension benefits:

  • Extra Pension Additional Pension Contributions (APCs)
  • Additional Voluntary Contributions (AVCs)

An Extra Pension APC allows you to buy extra LGPS pension, whilst AVCs allow you to build up a pot of money with an external provider which can then be used to top up your LGPS pension when you retire. You will receive tax relief on any contributions deducted from your pay.

If you're in the main section of the scheme you can choose to pay towards either an AVC or an APC. If you are in the 50/50 section, you will not be able to pay towards an Extra Pension APC.

APCs vs AVCs

Feature Extra Pension APC AVC
How you can pay for the extra pension You can pay towards the APC from your salary on a monthly basis, or you can make a lump sum payment, either from your salary or directly to the Fund. However, if you are within a year of your Normal Pension Age, you will only be able to pay a lump sum. You can choose either to make regular monthly payments or you can make a lump sum payment. Contributions must be deducted from your salary.
How the extra pension increases/decreases over time The extra pension you have bought will not decrease. You will get back the amount of annual pension you have paid for. What you get back depends on the type of Fund you have chosen, how much you pay in and how well investments perform.  You could get back more or less than you put in.
How much can be paid There is not a maximum amount you can pay in, but there is a maximum amount of annual pension you can purchase. The limit is currently set at: £7,352 of extra annual pension per year. The cost of purchasing the maximum extra pension depends on how close you are to your Normal Pension Age and the period you intend to spread payments over. You can pay up to 100% of your pay as long as you leave enough for tax and national insurance payments.
Payment flexibility If you are paying monthly, you pay a set amount on a monthly basis.  You can cancel payments at any time, but you cannot change the terms of the contract you have set up. You can change how much you pay at any time by providing notice to your AVC provider. You can cancel your payments at any time.
Transfer options You cannot transfer the extra pension separately to your main LGPS pension benefits. Your AVC Fund can be transferred separately from your main LGPS pension benefits
Tax-free lump sum at retirement The extra pension you purchase is included with the rest of your LGPS pension pot. You can take up to 25% of your total pension pot as a tax-free lump sum. You may be able to take all of your AVC fund as a tax-free lump sum, as long as you take it with your main LGPS pension benefits, and the value of the AVC Fund does not exceed 25% of your total pension pot.
Additional fees to be aware of There are no additional fees Additional fees that may be payable include discharge or exit fees and Fund management fees, depending on the AVC provider and the type of Fund.  Contact your provider for more information.
Death benefits There are no death benefits. The extra pension is for you only. If the AVC fund has not been paid when you die, the fund value would usually be paid directly to your nominated person, or your estate. Some AVC providers may offer additional life cover options

Extra Pension Additional pension contributions (APCs)

An APC is a contract to purchase a set amount of extra annual pension which is then added to your LGPS pension account. Annual pension is the amount you will receive each year once you put your pension into payment. You can choose the amount you pay towards an APC and also between paying it as a one off lump sum or as regular monthly payments.

The extra pension you purchase will keep up with the cost of living, as it is revalued each April according to the Consumer Price Index (CPI) along with the rest of your main scheme LGPS pension.

How much does it cost

You can currently buy a maximum of £7,352 a year of extra annual pension. This limit changes each year. As long as you do not exceed this limit you can choose how much you wish to pay.

The cost of purchasing extra pension depends on:

  • How much annual pension you want to purchase
  • Whether you choose to pay by lump sum or spread the cost
  • Your age at the time of application

The best way to get an estimate of how much it will cost is by using the APC calculator.

Who can apply to pay towards an extra Pension APC

You can contribute to an extra pension APC if:

  • you are actively paying into the LGPS
  • you are in the main section of the scheme
  • it is reasonable for your to fulfil the terms of the APC contract

If you are within one year of your normal pension age, you can still pay towards an extra pension APC, but you will only be able to pay by lump sum.

Paying towards an extra pension APC is subject to approval. If we believe it may not be possible for your to fulfil the terms of the APC contract, perhaps because you are in poor health, we have the right to refuse your applicable, though this is rare.

Spreading payments

If you want to spread the cost of the Extra Pension APC, you can choose to have contributions deducted from your pay monthly. If you are weekly paid, you can also pay weekly.

You can spread payments out over any length of time between one year and your Normal Pension Age. If you are less than one year from your Normal Pension Age you can only pay by lump sum.

Paying a lump sum

If you wish to buy extra pension by paying a one-off lump sum you can do so either by:

  • payroll
  • making a payment directly to the pension fund

If you pay by direct payment, you may still be able to claim tax-relief on your contribution by completing a self-assessment tax return. If you have any questions about this, contact HMRC.

How to apply

You can use the extra pension calculator to:

  • work out how much extra pension you will receive for Extra Pension APCs
  • how much an increase will cost you
  • apply for APCs

Find the pension calculation on the national LGPS website

If you are happy with the estimate provided by the calculator, click 'apply for extra pension' and fill out your personal details.

Once you have done this, click the ‘sign and download’ button at the bottom of the page to sign the contract. You can do this digitally or you can print a copy which can then be signed.

You can upload this your My Pension Online account or email it to us at [email protected].

If you have more than one employment, you must provide the payroll number of the employment you would like the Extra Pension APC linked to.

Next steps

We aim to approve an APC application for extra pension within 10 working days.

Once we receive your application, we will:

  • check you are eligible to pay towards an Extra Pension APC
  • check your application has been completed correctly
  • check it is reasonable for you to make the payments from your pay (if you have not chosen direct payment)
  • send you a medical form which you will need to complete and return to us

Once we approve your application, we will send you a confirmation letter. This will be issued to you via My Pension Online.

If you are making a direct payment, we will advise you of our bank account details.

If you are paying contributions from your salary we will contact your employer and ask them to action your request. The employer will begin making deductions from the next available pay date. If you have any questions about contribution deductions, you should contact your employer directly.

Receiving payment of APCs

You won’t be able to access the extra pension until you put the rest of your LGPS pension into payment.

The extra pension you purchase will be included on your annual benefit statement.

For more information about when you can take your pension, see When you can retire

Changing or ending an Extra Pension APC

An Extra Pension APC contract ends when:

  • you tell us you want to end the contract giving us one month’s notice
  • you stop being an active member of the scheme
  • you leave your LGPS employment before you retire
  • or take flexible retirement

Once you set up the contract you won’t be able to change it.

If the contract stops before it has been completed due to one of the above reasons, we will credit your account with the proportion of pension that you have paid for.

Other considerations:

  • there are no death benefits associated with extra pension APCs. The extra pension you purchase is for you only.
  • tax relief is available on all pension contributions deducted directly from your pay up to 100% of your taxable earnings.
  • the extra pension you purchase will increase the value of your pension pot for pension tax purposes. Please see ‘tax controls on pensions’ for more information.
  • your employer is not obliged to contribute towards an extra pension APC, but you can ask them to

Additional voluntary contributions (AVCs)

When you pay towards an AVC fund you build up a separate pot of money with an external provider which can then be used to boost your LGPS pension benefits at retirement.

You can set up an AVC Fund with either of our approved provided In-house AVC providers:

Paying for AVCs

You can pay towards an AVC as long as you are:

  • Actively contributing to the LGPS in the main or 50/50 section
  • You are under age 75

AVCs are paid directly from your salary. If you pay tax, you will benefit from tax relief on any contributions you make towards your AVC Fund.

You can pay up to 100% of your pensionable pay into an AVC fund, as long as you ensure there is enough left for:

  • your main LGPS contributions
  • national insurance contributions
  • tax

As long as this is not exceeded, the amount you pay is your choice. You can choose to pay a fixed amount, a percentage of your pay on a regular basis, or as lump sums.

You may start, stop or vary your contributions at any time by contacting your AVC provider.

Shared Cost AVCs

Some LGPS employers offer the option of a shared cost AVC. There are two types of shared cost AVC arrangements an employer may offer. With a standard shared cost AVC arrangement, you and your employer will make contributions towards your AVC fund. This may be either a one off lump sum or on a regular basis.

Alternatively, your employer may offer a salary sacrifice-shared cost AVC arrangement. With this type of arrangement, you would agree to a reduction in salary in exchange for your employer paying this excess amount into the AVC fund as an employer contribution. With this type of arrangement, you would benefit from reduced national insurance contributions.

If you have any questions about shared cost AVC arrangements, including setting up a shared cost AVC arrangement, changing how much you pay and transferring into a shared cost AVC arrangement, please contact your employer.

How AVCs work

Unlike your LGPS pension, and extra pension APCs, AVCs are held under defined contribution arrangements. This means that the money you pay in is invested and the amount you get back may be more or less than you have put in depending on:

  • the type of AVC Fund you choose
  • how much you pay in
  • how well the investment performs

Both providers offer a variety of fund investment options to choose from with varying levels of risk.

There could be management and discharge fees that you need to be aware of. You should check this directly with your chosen provider.

Apply for an AVC

You can apply for an AVC through our approved AVC providers:

Contact your employer if you wish to set up a Shared Cost AVC.

What can I do with my AVC Fund

Depending on your individual circumstances, if you set up an AVC Fund you may be able to:

  • take it at the same time as your LGPS pension benefits
  • leave it invested until age 75
  • transfer it out to one or more pension arrangements

If you take your AVC fund alongside with your main LGPS benefits, you may be

  • depending on the value of your AVC Fund, take some or all of it as tax-free cash
  • use your AVC fund to purchase additional pension in the LGPS
  • use your AVC fund to purchase an annuity outside of the LGPS

For more information see your AVC options at retirement

Other considerations:

  • the extra pension you purchase will increase the value of your pension pot for pension tax purposes. Please see ‘tax controls on pensions’ for more information.
  • before you can access or transfer your AVCs, unless exemptions apply, we will need to confirm that you have received a free Pension Wise appointment. More information is available at your AVC options at retirement and transferring out your pension
  • the value of your AVC Fund will not be included in your annual benefit statement. You will receive a separate annual statement showing the value of your AVC Fund from your chosen provider. Prudential offers an online portal where you can login and check the value of your fund at any time
  • if you die before taking your AVC Fund, we will usually be able to pay the value of the Fund to your nominated person(s), charity, or estate. Some AVC options offer additional life cover options

Making a decision

While we can provide information about the LGPS, we cannot offer you financial advice.

We always recommend that you Get help with decisions about your pension