Increasing your retirement benefits
Additional
Voluntary Contributions (AVCs)
Free Standing
Additional Voluntary Contributions (FSAVCs)
Contributing to
concurrent Personal Pension Plans or Stakeholder Pensions
How much can I buy?
You can buy annual
pension, either for yourself or for yourself plus any dependants, in multiples
of £250 up to a maximum of £5,000 per annum in aggregate.
What period do I
pay over?
Contracts may
commence at any time during the year but you must pay over a whole number of
years not exceeding the period to normal retirement age (age 65).
You
may not commence buying additional pension on or after your 64th
birthday.
When is the
additional pension payable?
The additional
pension is payable at retirement.
How much will my
additional pension cost?
The cost is
calculated using tables provided by the Government Actuary’s Department
(GAD). The cost depends on the following factors:
You can calculate
the cost using the ARC calculator, by
contacting NILGOSC on 0845 308346 or completing and returning our query form. We are happy to provide a
quotation, however, you may find the calculator on this website more useful as
it allows you to consider the costs over various payment periods.
You should
complete the ARC application form, form LGS 26, and forward this to NILGOSC along with a cheque
for your Good Health Medical. The current fee for a Good Health Medical is £110.00. When we receive your application
form and payment for the medical we will advise you of the medical appointment.
If you pass the Good Health Medical we will write to both you and your employer
confirming the additional monthly deductions which should be made from your pay
and the period you will be paying over.
What if I stop
contributing before the end of the payment period?
If you stop
contributing, leave or retire before the end of your payment period you will
receive a pension based on the contributions made up until the date they
ceased. If you retire early on ill-health grounds the contract is deemed
to have been paid in full.
What if I am on
unpaid leave?
If you are on
unpaid leave or child-related leave you must continue to make the contributions
to buy additional pension.
Can I make a lump
sum payment?
No. The
minimum period which you can contribute over is one year.
What happens if I
draw my pension before age 65?
If you draw your
pension before age 65 (and not on ill-health grounds) then your additional
pension will be reduced to take account of the early payment. The reduction for early payment does not apply to any
dependant’s cover which you have chosen to buy.
What happens if I
draw my pension after age 65?
If you draw your
pension after age 65, your extra pension will be increased to take account of
late payment. The increase for payment after age
65 does not apply to any dependant’s cover which you have chosen to buy.
Why do I have to
have a medical and do I have to pay for it?
If you retire on
grounds of permanent ill-health your extra pension will be deemed to have been
paid for in full. Therefore, NILGOSC needs to know that you are in
reasonably good health and unlikely to retire on ill-health grounds before age
65 before it will agree to your purchase of additional pension. You must
pay the cost of the Good Health medical.
Will the extra
pension go up in value?
Yes. Current regulations and actuarial guidance advise that
the amount of additional pension will be increased by the Retail Prices Index
(RPI) from the date of the first contribution until the date the benefits come
into payment.
However, this may change due to the Coalition Government’s
decision to increase public service pensions in accordance with the Consumer
Price Index (CPI) from April 2011.
If the method of increase changes, the costs of buying additional pension will be revised to take this into account.
Could the monthly
payments change?
It is possible that the monthly
payments could change in future. The actuary may change the rates from
time to time and this change will affect both new applicants and members who
are already buying additional pension.
If the possible change from RPI to CPI
occurs, the monthly payment could be changed immediately and may be backdated
to July 2010.
In all other circumstances, if the rates change, the new rates will apply from 1st April following the change and we will let you know the change beforehand.
If I choose to buy
extra pension now, can I buy more at a later date?
Yes, as long as the
total amount does not exceed £5,000. It should be remembered that the
cost of any later purchases of additional pension will depend on your age at
that date.
What are the
additional dependants’ benefits that are provided if I choose to buy additional
pension for myself plus dependants?
If you die in
service an additional dependant’s pension of 37.5% of the rate of additional
pension you were purchasing is payable to an eligible spouse, civil partner or
nominated co-habiting partner. A pension is also payable to eligible
children at the rate of 18.75% (of the rate of additional pension you were
purchasing) if there is one eligible child and 37.5% if there are two or more
eligible children shared equally between them. If there is no eligible spouse, civil
partner or nominated cohabiting partner, then the additional child’s pension is
25% of your extra pension and if there is more than one eligible child then 50%
of the your pension is split equally between the eligible children.
Can I give up some
extra pension at retirement to buy additional lump sum?
Yes, it is
possible to give up additional pension at retirement to provide extra lump sum
subject to tax limits.
You may also pay AVCs to top up your own pension, or your dependant’s pension
or to provide additional life cover. In this case you can invest money,
deducted directly from your pay, with an AVC provider. Any AVCs which you
pay are invested separately in funds managed by the AVC provider. You
have your own personal account which, over time, builds up with your contributions
and the returns on your investment. At retirement you may use this AVC
fund to buy an additional pension or to increase your lump sum, subject to both
Scheme and tax limits. Prudential is the current in-house AVC provider
for new contributors. Equitable Life is also an in-house AVC provider but
is no longer available for new contributors.
It should be noted that these AVC investments depend on the contributions paid,
the performance of the investments and on interest rates at retirement.
There is no guarantee that any particular level of benefit will be available at
retirement.
You can contribute 50% of your pensionable pay to the in-house AVC
arrangement. AVCs are deducted directly from your pay and tax relief (at
your highest rate) is automatically given through payroll. This means
that tax is calculated on your pay after your Scheme and AVC contributions have
been deducted.
This is where an
insurance company, bank or building society of your choice takes your AVC fund
and pays you a pension in return.
Buying a top-up
Scheme Pension
If you retire with
immediate payment of your benefits you maybe able to use some or all of your
AVC fund to buy a top-up pension from the Scheme. You can choose whether
you wish this pension to provide benefits only for yourself or for yourself
plus any dependants.
Current Scheme
regulations allow you to take your AVC fund at retirement, subject to tax
limits, in whole or in part as tax free cash. If you decide to defer
drawing your AVC until after retirement you can normally only have up to 25% of
your AVC fund as a lump sum.
Leaving the Scheme before retirement
If you leave before retirement, your AVC contributions will cease. The value of your AVC fund will continue to be invested until it is paid out. Your in-house AVC scheme is similar to your main Scheme benefits: it can be transferred to another arrangement along with your main Scheme benefits, drawn at the same time as your Scheme benefits or deferred until the eve of your 75th birthday.
How do I contribute to an AVC?
If you wish to contribute to the in-house AVC Scheme
you should contact Prudential. Prudential provide the in-house AVC scheme
which is open to new members.
Contacting Prudential – more information, including application forms and
quotations are available directly from Prudential at The Pension Connection on
0845 607 0077. You may also wish to refer to Prudential’s website at www.pru.co.uk/localgov