Can I pay more to increase my pension benefits?
Most of us look forward to a happy and comfortable retirement and in order to have that little bit extra during your retirement years you may wish to consider paying extra contributions, which are a tax efficient way of topping up your income when you retire.
There are a number of ways you can provide extra benefits, on top of the benefits you are already looking forward to as a member of the LGPS.
You can improve your retirement benefits by paying:
- Additional Pension Contributions (APCs) to buy extra pension (but not if you are in the 50/50 section)
- Additional Voluntary Contributions (AVCs) arranged through the Fund (in-house AVCs), where you can invest money, deducted directly from your pay to provide additional retirement benefits.
- Free Standing Additional Voluntary Contributions (FSAVCs) to a scheme of your choice
- Contributions into a stakeholder or personal pension plan
You can combine any of these options.
Buying Added Years (extra LGPS membership) and paying Additional Regular Contributions (ARCs)
If you’re already paying extra contributions to buy extra years, you’ll continue to pay for them and receive extra benefits on the same basis that you had agreed to buy them.
To purchase additional pension through an Additional Regular Contribution (ARC) contract you must have opted to do so before 1 April 2014. If you're already paying extra contributions to buy extra pension, you'll continue to pay for them and receive extra pension on the same basis as when you agreed to buy extra pension.
Are there any limits on how much I can pay to increase my pension benefits?
There is no overall limit on the amount of contributions you can pay (although there is a limit on the extra scheme pension you can buy and on the amount of Additional Voluntary Contributions you can pay). However, 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 a personal pension or stakeholder pension scheme).
Additionally, under HM Revenue and Customs tax rules there are controls on the pension savings you can have before you become subject to a tax charge, although most people will not be affected by these controls.