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Buying Additional Pension
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How much additional pension can I buy?
You can pay additional regular contributions (arcs) to buy additional scheme pension. The maximum amount of annual pension you can buy is £5000. You can choose to buy additional annual pension in multiples of £250 for you alone or you and any survivor.
Do I get tax relief on the extra contributions?
If you pay tax, you will receive tax relief on the extra contributions just as you do on the basic contributions you pay. LGPS contributions are deducted direct from your pay and the tax relief (at your highest rate) is automatically given through the payroll. This means that tax is calculated on your pay after your pension contributions have been deducted.
How long do I have to pay contributions?
You can choose the length of period for which you wish to pay the extra contributions over. This period cannot be less than 1 year or cannot exceed the period to normal retirement age. Therefore you may not commence a contract on or after your 64th birthday. If you elect to buy additional pension in the LGPS, you will start paying contributions from the next available payday after your election.
How much do I have to pay to buy additional pension?
The amount of contributions you pay will depend on your age when you start paying the additional contributions, the amount of pension you wish to buy, whether you wish to buy a single life or attaching survivor benefit, and the period over which you wish to pay the contributions. If you would like a quote please contact us and request a Form 12. Before an election to pay additional contributions can be accepted, you will be required to produce, at your own expense, a medical report from a registered medical practitioner to show that you are in reasonably good health.
What if I am absent?
If, whilst paying additional contributions, you go on maternity/parental leave with reduced or no pay, you will be required to continue paying the additional contributions in full.
What if I choose to retire after age 65?
Like your scheme pension, your additional pension will be actuarially increased. If you choose to purchase a survivor pension, upon your death, the calculation is based on your additional pension excluding the late retirement increase.
What if I choose to retire before age 65?
If you retire before age 65 and you have completed your contract, an actuarial reduction will apply to the additional pension to allow for early retirement. If you choose to purchase a survivor pension, upon your death, the calculation is based on your additional pension that would have been paid without the early retirement reduction.
What if I wish to stop paying or leave before I have completed the contract?
You may choose to stop paying additional contributions at any time by notifying SYPA, in writing that you wish to do so. You will be credited with the proportion of additional pension you have bought to the date you stop paying. If you later wish to re-commence payment you will be required to take out a new contract and produce medical evidence again. Your contribution rate will be different to the original contract because you are older and it is linked to your age. If you leave (other than on the grounds of ill health tiers 1 or 2) before completing the contract to buy additional pension you will be credited with the proportion bought to the date of leaving. If, however, you are retired on health grounds under tiers 1 or 2 while paying additional contributions to increase your annual pension, (single life or attaching spouse) the contributions will be deemed to be fully paid. This means that the full amount of additional pension you were buying will be used in the calculation of the benefits due.
What would happen if I were to die in service?
If you choose to purchase a single life pension, then no additional pension benefit would be payable upon your death. If you choose to purchase a pension with attaching survivor benefits, upon your death, all contributions will be deemed to be fully paid. This means that the full amount of additional survivor pension you were buying will be used in the calculation of the benefits due.
Will my additional pension receive increases each year like my scheme pension?
Yes, your additional pension will be subject to annual increases, both before and after the additional pension comes into payment. The additional pension is increased from the first contribution payment, in line with inflation.
Will the contributions alter if I start to work part-time?
No, you will be required to pay the same amount of contributions as you did when you worked full-time.
Will the payments stay the same throughout the contract period?
Regular contributions are the same amount each month and are not indexed linked. However, contributions are subject to change in the future upon review by the Government Actuary's Department. Any revision to rates would apply to any additional pension contracts that still had contributions outstanding at the time of the revision. The revised contributions would take effect for existing contracts on the 1st April following the revision |
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