Thinking of topping up your LGPS benefits?August 16, 2017
In order to have a little bit extra during your retirement years you may wish to consider paying extra contributions. As an active member of the LGPS you have access to two ways of increasing your pension benefits in addition to the benefits you are already building up. These options are Additional Voluntary Contributions (AVCs) and Additional Pension Contributions (APCs).
Additional Voluntary Contributions (AVCs)
AVCs allow you to build up a separate pot of money alongside your Local Government Pension Scheme (LGPS). This can then be used to provide you with additional retirement benefits.
- The contributions you make are tax efficient as you pay the money in directly from your salary before tax.
- You can stop, restart and change them any time although, as you may expect, if you do stop or reduce your AVCs, it will affect how much money you will eventually have. Charges will continue to be deducted even if you stop contributing.
- Your AVC pot is invested in funds and you choose which ones are right for you.
As AVCs are investment based, it’s important to remember that the value can go down as well as up and you may not get back the amount you put in. The tax you pay depends on your individual circumstances. HM Revenue & Customs tax rules may change in the future.
To find out more about AVCs, please The Prudential’s website at www.pru.co.uk/lgsite.
Alternatively, call The Prudential’s Retirement Specialist Team on 0800 028 1493. Lines are open Monday to Friday, 9am to 6pm. They can’t give you advice, but they can talk to you about your personal situation and help answer any questions you may have about AVCs.
Additional Pension Contributions (APCs)
If you are in the main section of the LGPS you can pay APCs to buy up to £6,755 of extra pension. You can choose to pay for the extra pension by spreading the payment over a number of complete years through your pay or by paying a lump sum.
If you wish to spread the payment, the regular contributions would be deducted from your pay, just like your normal pension contributions. Your normal contributions plus the APCs are deducted before your tax is worked out, so, if you pay tax, you receive tax relief automatically through the payroll.
Tax relief it available on all pension contributions up to 100% of your taxable earnings.
The minimum period of time that you can spread the payment of APCs over is 12 months, and the maximum is the number of years to your normal pension age. Your normal pension age is linked to your State Pension Age (but with a minimum of age 65). If you are a year or less from your normal pension age you can only pay for APCs by lump sum.
You cannot elect to buy APCs if you are currently in the 50/50 section of the LGPS.
An APC calculator is available on the National LGPS website. Use the find out more buttons to access the online calculator where you can get a quote and print off an application form. The full terms and conditions can also be found in the calculator.