We always recommend you regularly review what income you are building up for your retirement. If you feel you’d like to have a little more than you are currently building in your retirement account, you can use any of the following four options to increase your retirement savings:
- Buying extra pension in the EAPF
You can use this option if you’re a member of the Main Section of the scheme and you can pay additional contributions to buy up to £7,194 of extra LGPS pension. You can do this by paying additional pension contributions (APCs) over a number of complete years or by paying a lump sum.
If you choose to spread your contributions, your APCs would be deducted from your pay, just like your normal pension contributions, so, if you pay tax, you’ll automatically receive tax relief. The minimum period of time that you can spread the payment of APCs over is 12 months, and the maximum is the number of complete years to your normal pension age. Your normal pension age is the higher of your State Pension age or age 65. If you are a year or less from your normal pension age you can only pay by lump sum.
If you’d like to buy extra pension by paying a one-off lump sum, you can do this through your pay or by making payment directly to the EAPF. If you choose to make payment directly to the EAPF, you’ll need to arrange to collect your tax relief directly with HMRC. You can do this by making a self assessment tax return.
You can get a quote of the cost of buying extra pension by visiting https://lgpsmember.org/more/apc/index.php but please remember if you choose to spread your contributions then the rate you pay is subject to periodic review and may change before you reach the end of your contract term.
- Paying additional voluntary contributions (AVCs)
Paying AVCs into the EAPFs in-house AVC will enable you to build up a pot of money that you can then use in a number of ways on your retirement. You can use it to increase your LGPS pension or you could take some or all of your AVC pot (subject to certain limits) as a tax free lump sum.
You can pay up to 100% of your pensionable pay into an in-house AVC. Any money you choose to pay into an AVC pot is deducted directly from your pay before your tax is worked out, so, if you pay tax you’ll automatically receive tax relief. You’ll also be able to decide how the money in your pot is to be invested.
You can use this option whether you’re in the Main or 50/50 Section of the scheme.
- Paying into a free standing additional voluntary contributions (FSAVCs)
FSAVCs are similar to in-house AVCs but are not linked in any way to the LGPS or any other pension arrangement. With FSAVCs, you choose the provider, usually an insurance company, and the investment funds you’d like to use.
- Paying into a stakeholder of personal pension plan
With these arrangements, you choose a provider, usually an insurance provider and again, the investment funds you’d like to use.
You can use one or more of these options while you’re a member of the EAPF, depending on what you want to build for your retirement. If you’re not sure what is the best option is for your circumstances, we would recommend that you take independent financial advice. You can find free and impartial money advice that’s set up by the government by visiting www.moneyadviceservice.org.uk/en
If you’d like to know more about these options and how to set up APCs and IHAVCs, please read our factsheet Topping up my LGPS pension.