Awarding additional pension benefits

The LGPS (NI) regulations permit an employer to either award additional membership in the Scheme, known as augmentation, or award additional pension.  These are both employer discretions and employing authorities must have a policy stating how they will apply their discretions.  An employer may award both additional membership and additional pension to a member.

Awarding additional membership – Augmentation

An employer may award up to 10 years additional membership to improve an employee’s pension benefits.  A resolution to award additional membership must normally be made before an employee leaves employment except in the event of redundancy or efficiency retirement when an employer may pass a resolution to award additional membership within a 6 month period from the date of leaving.  However, any resolution to augment membership made after the date of leaving will be treated as a separate benefit for HMRC purposes i.e. the member will be restricted to maximum tax free cash of 25% of this additional fund value.

The cost of augmentation is calculated by the actuary.  This cost takes into account the member’s pension, spouse’s pension, pensionable pay, years to be granted and appropriate market value adjustment (AMC).  This AMC varies from month to month and is applied at the beginning of each month for the month.  It should be noted that the augmentation cost which will apply when invoiced may differ from that quoted if the AMC has altered.

Awarding additional pension

An employer may award a member up to £5,000 per annum additional pension.  This may be in addition to augmentation.  This additional pension only increases the member’s benefits and does not provide any increased survivor or dependant’s benefits.

The cost of additional pension is calculated by the Government Actuary’s Department (GAD) and these costs will be revised by GAD from time to time.  The factors depend on the member’s age at their last birthday and their sex.  Click here to use our calculator which will enable employing authorities to calculate the lump sum contribution.

The rate of additional pension is increased by RPI from the date of the lump sum payment to the date of award of benefits.  Once in payment the additional pension is increased with reference to RPI.

Payment to the Committee for augmentation or awarding additional pension

On advice of a resolution to award augmentation and/or additional pension NILGOSC will invoice the awarding employing authority.  This invoice must be paid within one month of the date of resolution or such longer period as the employer and the Committee agree.