Increasing pension benefits - Additional Pension Contributions (APCs)
If you want to save more for your retirement you have an option of paying Additional Pension Contributions (APCs). If you are in the main section of the scheme, you can pay more in contributions to buy up to £6,675 (as at 1 April 2015) of extra pension. Any extra pension you buy is payable to you each year in retirement and is payable on top of your normal LGPS benefits. APCs count towards your pension only and do not count towards death in service or survivor’s pension benefits.
You can normally pay for this extra pension on a regular basis directly from your pay, over a complete number of years, or via a lump sum (either from your pay or directly to Derbyshire Pension Fund).
If you choose to retire early (before your Normal Pension Age) the extra pension you have bought will be reduced for early payment. If you choose to draw your pension after your Normal Pension Age any extra pension you buy is increased because it's being paid later.
On retirement, you can choose to exchange some of the extra pension you have bought for a tax-free cash lump sum in the same way as your main LGPS pension.
If you are paying into the pension scheme in more than one job within the Derbyshire Pension Fund you must specify which job the extra pension is to be credited to. If you wish to pay APCs for more than one job you will need to complete a separate application for each job.
The whole cost of any extra pension you buy is paid for by you unless your employer chooses to pay some or all of the cost of the APC (known as Shared Cost APC). Making contributions to a Shared Cost APC (except in cases where a member chooses to buy lost pension for an authorised unpaid absence, within 30 days of returning to work) is at each employer’s discretion and you would need to ask your employer what their policy is on this.
You can use the online calculator found on the national LGPS website to see how much it costs to buy extra pension. To use the calculator you may need information about your pay and you would need to ask to ask your employer for this information.
Spreading payments to buy additional pension
The minimum period of time you can spread payment of APCs is 12 months and the maximum period is the number of full years left up to your Normal Pension Age.
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. You can choose to stop paying APCs at any time by notifying the Derbyshire Pension Fund in writing.
If you wish to pay by regular contributions from salary you are also required to complete a medical clearance form (see below) and send this to your doctor who must declare that you are in reasonable health before you will be allowed to buy extra pension through regular contributions. The cost for your doctor to complete this declaration will be at your own expense.
Paying by lump sum (one-off payment)
If you wish to pay by a one-off lump sum you are not required to complete a medical clearance form.
You can pay by lump sum from salary (as long as your salary plus any statutory deductions is sufficient to cover the payment) or by direct payment to the Pension Fund.
If you choose to buy extra pension by making a lump sum payment, you will be credited with the full amount of pension bought.
Where you are paying by lump sum payment, direct to the pension fund administering authority, you should be aware that there are potential tax implications if you use a tax free lump sum due from, or already received from, a pension scheme to pay for the APC. This activity is known as recycling and you can find more information at the HMRC website. See:
Any extra regular contributions are taken from your pay and if you pay tax, you receive tax relief automatically through the payroll. If you choose to pay by a lump sum outside of your salary you would need to claim any tax relief through submission of your annual tax return or directly with Her Majesty’s Revenue and Customs (HMRC). Please note, tax relief will only be given on contributions up to 100 per cent of your UK taxable earnings or, if greater, the maximum permitted to a tax relief at source arrangement, such as an additional pension contribution arrangement.
How to proceed with your application
If you wish to proceed with paying APCs to increase your pension, you should complete the quotation on the LGPS 2014 website and send this to the Derbyshire Pension Fund at the address given below.
If paying by regular contributions you should also complete the medical clearance form and have this signed by your doctor (see 'APC3 - Medical clearance for APC' form in the related documents section below).
Return your application to:
Derbyshire County Council
Do not send any payment at this stage. The pensions department will contact you about the next stage of the process.
If there is a delay in a decision on whether your application can be accepted which is caused by you and you pass a birthday which results in the cost of purchasing extra pension to change, you will be asked to resubmit a new application.
Application checklist: before sending your application please make sure that you have the following:
- quote from national LGPS 2014 website
- medical clearance (if paying by regular contributions).
Additional Voluntary Contributions (AVCs)
You can pay Additional Voluntary Contributions (AVCs). AVCs are a form of investment to build up a separate pension or lump sum or a combination of both. We have chosen the Prudential as our in-house AVC provider although you can choose AVCs with other providers through Free Standing AVCs.
You can pay up to 100 per cent of your pensionable pay into a new AVC, from any usual pay day, into your pension. The 100 per cent excludes your standard Local Government Pension Scheme contributions. You also have the option to put your contribution level up or down at any point up to retirement..
If you are interested in the Derbyshire Fund's AVC package with Prudential please contact the Prudential's Pension Connection Team directly on free phone 0800 731 0466 between 9am and 6pm Monday to Friday, or apply online.
You should note, if you start a new Prudential AVC and withdraw this within five years of your first contribution an early withdrawal charge will apply. Please contact the Prudential's Pension Connection Team directly regarding charges.
If you decide to pay AVCs with the Prudential, we will be informed by the Prudential and will arrange for contributions to be taken from your pay.
It is our understanding based on new regulations that any new AVC contract started from 1 April 2014 onwards will be subject to different limits as follows:
- you will be able to pay up to 100 per cent of your pay (less statutory deductions) into a new AVC contract
- you will be limited to taking 100 per cent of the AVC fund as a tax free lump sum on retirement (subject to HMRC limits).
We also understand that any AVC contract started before 1 April 2014 will not be effected by these new limits. Please see the following table for a comparison of our current understanding of these changes:
AVC contract information
|AVC contract start date||Limit on contributions from pay||Limit on tax free lump sum at retirement from AVC fund|
|On or before 31 March 2014||Up to 50% of pensionable pay (as defined in 2008 scheme – i.e. does not include overtime)||Up to 100% of AVC fund (subject to HMRC limits). Any remainder as pension|
|On or after 1 April 2014||Up to 100% of pensionable pay (as defined in 2014 scheme – i.e. does include overtime)||Up to 100% of AVC fund (subject to HMRC limits). Any remainder as pension|
If, due to the change in the treatment of AVCs, you wish to start a contract, please contact the Prudential directly on 0800 234 6916 where a call back option is available.
Please note that in order to be treated as a contract that has started on or before 31 March 2014, Prudential must have received your instruction to start the contract by close of business (6pm) on Monday the 31 March 2014, this can be either by phone or by completing and posting the application form, though please be aware that if completing the form, this must be received by Prudential by the deadline, proof of posting will not be accepted as proof of receipt.
The Derbyshire Fund has 13 different Prudential investment funds. These are split into six different 'risk categories' from minimal risk to high risk. The level of risk is determined by the volatility of the investment. You can choose any of the 13 different investment funds or a combination of them. If you do not specify your investment choice you will automatically go into the default fund "with-profits."
The Prudential also offers life assurance cover, on top of your automatic life cover provided by the Local Government Pension Scheme. If you are interested in this additional life cover please contact the Prudential's Pension Connection Team directly on free phone 0800 731 0466 between 9am and 6pm Monday to Friday.
If you decide to pay life cover with the Prudential, we will be informed by the Prudential and will arrange for contributions to be taken from your pay.
Our pension section cannot provide you with financial advice and you may wish to consider taking independent financial advice regarding the payment of AVCs or life cover.
Buying lost pension for authorised unpaid absences
If you have taken any unpaid child-related leave, authorised unpaid absence or have been absent due to a trade dispute after 1 April 2014, you can make up the 'lost' pension by paying Additional Pension Contributions (APCs).
APCs can be paid either as a one-off lump sum or as monthly deduction from your pay for a pre-arranged period.
An online APC calculator is available on the National LGPS 2014 website to show how much it will cost for you to make up the 'lost' pension.
For absence due to a trade dispute, you will have to pay the full cost yourself. For authorised absence and child-related leave, if you make an election to pay for the pension loss within 30 days of your return to work, your employer will share the cost with you (you pay one third and your employer pays two thirds). More information about shared cost APCs can be found on the National LGPS website.
To use the calculator you will need information about your 'lost' pay during your absence. You will need to ask your employer for this information. You should complete the quotation and print off the details. If you wish to proceed with paying APCs to make up the lost pension, you should complete the election on the National LGPS website and send the completed form to your employer.
Your employer will check the amounts and start to take the contributions from your next available payroll, unless you have elected to pay by a lump sum direct to the Pension Fund. Your employer will then forward the information to Derbyshire Pension Fund.
Once the information has been received by the pension fund we will update your pension record and send you an acknowledgement to confirm this.