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How do I increase my pension?

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.  As a member of the LGPS you have access to two tax efficient ways of increasing your pension benefits in addition to the benefits you are already building up.  These are:

Additional Pension Contributions (APCs)

You can pay APCs to buy an additional annual pension up to the maximum allowable in accordance with the latest regulations.  This can be by regular payment or by a lump sum.  The additional contributions attract tax relief and the cost of the pension amount being purchased depends on your age, sex and the length of your payment period (if purchasing through a regular payment).  You can specify how long in years you wish to make your purchase over, but you can only pay up to the end of the year before your Normal Pension Age (State Pension Age or 65 if this is later).

 

How do I pay the contributions?

Your employer will deduct your contribution directly from your pay and, if you are a taxpayer you will automatically receive tax relief on your contributions.  You may be able to make a lump sum payment directly from your pay but if you make it by alternative means you will have to apply directly to HMRC to claim tax relief.  The contribution will be taken on the next available pay day following the date of election, and you will be asked to certify that you are in good health, with no pre-existing medical conditions.

If your pay reduces below the level of your chosen contribution amount, the contract will automatically cease. 

 

What happens if I go on approved leave of absence?

You must continue to pay the additional contributions during your leave of absence regardless of whether it is paid or unpaid leave.

 

What happens if I reduce my hours?

You will continue to pay the same monthly contribution as you did when your contribution started.

 

Can I stop paying?

You can stop the additional contributions at any time; however the additional pension you agreed to buy will be reduced from the original contract amount. If you do want to stop paying for any reason you must notify both your employer and Cheshire Pension Fund in writing. The pension you have purchased that scheme year will be added to your total.

 

What if I leave or retire before the contract ends?

If you retire on ill-health grounds with a Tier 1 or 2 pension you will be credited with the full amount of pension you have elected to purchase as if the contract had been completed. If you leave for any other reason and you have not finished the contract you will be credited with the additional pension you have actually paid for at the date you leave. This will, clearly, be less than the original contract amount. If you leave the scheme with less than two years service and take payment of a refund the contributions paid to allow additional pension to count will be refunded to you also.

 

How is the additional pension purchased increased?

At the beginning of each scheme year the pension credited into your account from your APC will be increased together with the main pension accrued.
When you retire and receive your additional pension, it is increased each April, with your main scheme pension. These increases are set by the Pension Increase Orders (PI), which are in line with the Consumer Price Index.

 

Other points to note

Generally, the cost of an APC is set at the beginning of the contract and the contributions are deducted at the same amount each month. The cost can be changed under certain circumstances, as the rates are reviewed periodically by the Government Actuaries Department and are subject to change. Any future changes to the rates will apply from the 1st April following the amendment, and will apply to all APC contracts that still have contributions outstanding at the time of change which continue past that date. 

Additional pension purchased can count towards your death grant as follows:

  • If you die with a deferred benefit, a death grant of 5 times the value of the additional pension you paid is payable.
  • If you die on pension, have received less than 10 years pension and you are under age 75 at the date of death, a death grant of 10 times the rate of pension (adjusted if you have increased your lump sum) less any pension already paid.
  • If you die as an active member of the scheme, a death grant of 3 times pay is payable.

You can visit the LGPS website for an APC quote APC Modeller

 

If you want to go ahead with a purchase

  1. Enter your details and calculate a quote on the external modeller
  2. Print off 1 copy of the Application for Additional Pension Contribution (APC) Form you have completed using the external modeller
  3. Print off 1 copy of the Cheshire Pension Fund’s Election to Purchase Additional Pension Form (PDF Version) or (online version)
  4. Make sure you have read the Buying Extra Pension Terms and Conditions Factsheet 
  5. Read and sign both Election forms
  6. Return both forms to the pension section at:
    Cheshire Pension Fund
    Cheshire West and Chester Council
    Council Offices
    4 Civic Way
    Ellesmere Port
    CH65 0BE

We will make any necessary checks and once satisfied arrange deductions with your employer.

Additional Voluntary Contributions (AVCs)

What are AVCs?

Additional Voluntary Contributions (AVCs) are a tax efficient and flexible method to build up a separate pension pot of money. Presently you can take 100% of your AVC pot as a tax-free cash lump sum when the benefits are taken at the same time as the LGPS pension (as long as this isn’t more than 25% of the total value of the LGPS pension benefits taken) or use the fund to purchase a pension from the LGPS or an annuity provider. We are required to provide an AVC through an outside provider and Cheshire Pension Fund has a nominated provider Standard Life.

 

How does an AVC plan work?

You elect how much you wish to pay each month into your AVC and your contributions are deducted from your pay and forwarded to your AVC provider to be invested. When you retire you can elect to use your AVC to improve your benefits.

 

How much can I pay into an AVC?

AVC contributions are paid in addition to your main LGPS standard contribution rate. Currently you can elect to pay up to 100% of your pensionable pay in any month into your AVC. You can elect to pay a set percentage or a fixed monthly amount of your earnings. You however cannot back date contributions into your AVC.

 

Can I change my monthly contributions?

You can increase or decrease the amount you are paying into the AVC as well as stop paying or restart at any point. The maximum contribution is 100% of pensionable pay, less statutory National Insurance contributions and your main scheme contributions.

 

How are my contributions invested?

Standard Life offer a wide range of funds to invest in – details of which can be found on their website. You can change your fund at any time without incurring a penalty, unless you have invested in Standard Life’s ‘With Profits’ fund.

 

Do my contributions attract tax relief?

Yes, if you pay tax your contributions will attract tax relief making an AVC an efficient method of saving.

 

What charges are made on my fund?

Standard Life make administration charges to run your AVC. The base charges are set out on the fund choice documents held on the website, however since the AVC will be taken out through the Cheshire Pension Fund there is a discount of 0.375% on all charges for Standard Life AVCs.

 

Is there any help available to make a decision on which fund to invest in?

Cheshire Pension Fund are not able to provide any financial advice, however Standard Life provide a tool on their website which can assess your attitude to risk and provide a recommended investment fund based on this. Any AVC investment is made at your own risk and Cheshire Pension Fund cannot make any recommendation on the suitability of investments and cannot be held liable for any investment decision made.

 

What benefits will I get from my AVC at retirement?

At retirement you can choose to use the value of your AVC fund to increase your retirement pension. You can do this by buying additional pension in the LGPS, by buying an annuity from either your AVC provider or from any other pension provider of your choice.

If you buy an additional pension through the LGPS it will be inflation proofed and will provide additional dependant’s benefits.  If you purchase an annuity from another pension provider you will need to make a decision at the time about what sort of inflation proofing or dependant’s benefits you wish to provide.

You can also elect to take up to 100% of your AVC fund as a tax free cash lump sum when the benefits are taken at the same time as the LGPS pension (so long as this isn’t more than 25% of the total value of the LGPS pension benefits taken).  Your maximum tax-free lump sum cannot exceed 25% of your lifetime allowance. 

 

What happens if I leave the Cheshire Pension Fund before I reach retirement age?

If you leave before retirement your AVC fund will accompany your main Scheme benefits. So if you transfer your main Scheme benefits to another pension scheme your AVC fund will transfer to that scheme’s AVC fund.

If you leave your LGPS benefits deferred and draw them at a later date then you will still have the option to draw up to 100% of your fund as tax free cash and purchase an annuity from another pension provider. You will not, however, be able to buy additional LGPS pension.

 

What happens if I die before taking my benefits?

The value of your accumulated AVC Fund to the date of death is paid to your nominated beneficiary or your estate.

 

What is a Free Standing AVC (FSAVC)?

FSAVCs are policies offered by banks and other financial institutions on an individual basis. You must make your own arrangements with the provider of your choice. Your Independent Financial Advisor will be able to guide you.

 

How do I stop making AVC contributions?

You can stop deductions at any time. You must make your request in writing and forward it to the Pensions Section. 

 

I have an AVC elsewhere can I transfer this to an in-house AVC with Standard Life?

You must make an election to ‘transfer in’ your AVC benefits within 12 months of joining the Local Government Pension Scheme. Current regulations permit the transfer of AVCs from other Local Authorities into an in-house AVC such as Standard Life. However, if your previous AVC was with a company or private pension scheme, it can only be transferred into the main scheme to purchase additional Local Government Pension Scheme pension in the first year of your scheme membership.

 

Can I transfer my AVC to a personal pension scheme to access my benefits flexibly?

Yes, you can transfer your AVC to a defined contribution scheme and access the benefits flexibly under ‘Freedom and Choice’ legislation. For more information please read the LGPS Freedom and Choice factsheet.

 

Employer Discretions

Shared Cost AVCs – Your employer has the discretion to set up a Shared Cost AVC and if you join, your employer will also make contributions into your personal fund.  You should ask your employer for more details.

 

For further information on the AVC funds offered by Standard Life please visit:

Standard Life – Your Local Government AVC Plans (External Website)

 

If you want to go ahead with a purchase please complete the following form:

AVC Option form – New customers

 

Existing Standard Life AVC members

If you wish to make any amendments or cease payment to your existing AVC plan please use the following form:

AVC Option Form – for existing AVC members

Are there any other ways of increasing my Pension Benefits?

Pre 1 April 2008 Added Years

This option was removed from the scheme with effect from 1 April 2008 however members who had elected to purchase additional service prior to 31 March 2008 can continue to purchase their contract until they reach their retirement date.  If you hold an added years contract and have any queries please contact the Cheshire Pension Fund.

 

Other Pension Schemes

You can make your own arrangements to pay into a personal pension plan or stakeholder pension scheme whilst also contributing to the LGPS.  This is known as a concurrent pension.

Cheshire West and Chester Council as Administering Authority for the scheme is not permitted to offer nominated concurrent pension arrangements as it does with AVCs.  Scheme members must make their own arrangements.  Your employer is not required to make any contributions to concurrent pensions.

Contributions to concurrent pensions are invested outside of the main scheme, generally in stock and shares.  There are restrictions on when you can drawdown your investment but you can use these funds to generate additional lump sum and annual pension benefit (subject to HMRC maximum limits).  The pension benefits derived from concurrent schemes are in addition to your LGPS benefits.