Buying extra pension

If you want to buy extra pension for your retirement you have the option of paying Additional Pension Contributions (APCs).

The maximum amount of annual pension you can buy using an APC is £7,026 (as at 1.4.2019). This figure will increase each year in line with the cost of living.

Any extra pension bought will be for you only. In the event of your death no extra pension benefits will be payable to your dependants.

You can choose to buy extra pension by spreading payment of the additional pension contributions over a number of complete years or by making a one-off lump sum payment. However, if you are a year or less from your Normal Pension Age (NPA) or you are over NPA you can only pay by means of lump sum.

If you choose to spread the payments, the additional contributions would be deducted from your pay each pay period and attract automatic tax relief. If you choose to make payment by a one off lump sum this would normally be deducted from your pay (with automatic tax relief). However, you have the option to make a lump sum payment direct to South Yorkshire Pensions Authority but you would then be responsible for claiming any tax relief on the payment direct from HM Revenue and Customs via your self-assessment tax return. Please note, tax relief will only be given on contributions up to 100% of your UK taxable earnings or, if greater, £3,600 to a tax relief at source arrangement, such as an additional pension contribution arrangement.

If you choose to buy extra pension by making a lump sum payment, you will be credited with the full amount of extra pension bought.

If you choose to spread payment of the additional pension contributions over a number of complete years you will be credited with the full amount of extra pension bought if you complete the payments or if, before completing payments, you are retired on the grounds of ill health with an enhanced pension. In all other cases, if you cease payments early (either because you choose to cease making the payments or because you cease membership of the pension scheme) you will be credited with the amount of extra pension you had bought at that time.

Your employer can choose to contribute to the amount of extra pension to be purchased, this is known as Shared Cost Additional Pension Contribution (SCAPC) arrangement, and is an employer discretion. You can ask your employer what their policy is on this.

Any extra pension bought increases the pension payable to you when you draw your pension. If you draw your pension before your Normal Pension Age (NPA) under the pension scheme the extra pension that has been bought will, unless retirement is on the grounds of ill health, be subject to a reduction (because you are drawing it early) and if you draw your pension after your Normal Pension Age (NPA) it will be subject to an increase (because you are drawing it late).

 

Process to buy extra pension