Topping up your benefits
If you’re contributing to the Local Government Pension Scheme (LGPS) you can top up your benefits in two ways – additional pension contributions (APCs) and additional voluntary contributions (AVCs).
Your basic LGPS contributions are a percentage of your pay. If you choose to top up through either APCs or AVCs, both are set up as separate contracts to which your employer does not generally contribute towards.
It’s important to first check the value of your pension benefits by using your My Pension account and looking at your retirement income overall to help you decide on whether to pay extra.
Her Majesty’s Revenue and Customs (HMRC) impose two controls on the amount of pension savings you can make without having to pay extra tax. These controls are known as the annual allowance and lifetime allowance. APCs and AVCs, just like your LGPS benefits, are subject to these limits.
Buying extra pension in the form of additional pension contributions (APCs) is in addition to the main scheme contributions you currently pay. APCs are set up as a separate contract with the Greater Manchester Pension Fund (GMPF).
If you have been absent from work there are circumstances in which your employer will help you buy back any lost pension via shared cost additional pension contributions (SCAPCs). These are similar to APCs, however you may need to pay for a doctor's certificate to confirm you are likely to be fit enough to complete the payments.
Some key points about APCs:
- Any extra pension you buy will be paid for at the same time as your main scheme Local Government Pension Scheme (LGPS) benefits.
- You must be in the main scheme to be able to buy extra pension. This option is not available if you are in the 50/50 section.
- There is a maximum amount you can boost your pension by, currently £7,352. This amount changes each year with inflation.
- Payment can be made by a regular deduction from your pay, a one off payment deducted from your pay, or a one off payment paid directly to GMPF.
- If paying by regular contributions, the minimum period that you can spread the payment over is 12 months. The maximum period is the number of years to your normal pension age (NPA).
- If you are a taxpayer, APCs are deducted before your tax is worked out. This means you receive tax relief, the same as your main scheme contributions.
- At the end of every pension scheme year (31 March), the amount of extra pension you have paid for in that year is added to your pension account.
How do I get a quote?
You can find out the cost of buying extra pension by using the LGPS additional pension calculator.
If you wish to go ahead with buying extra pension, download the form within the calculator and contact us. We will send you a medical form which will need to be completed by your GP, to confirm you are fit enough to complete the payments. You will then need to post the forms back to us.
How do I access my APCs?
On retirement, you can choose to convert some of the extra pension you have bought into a tax free lump sum, in the same way as your main scheme pension.
The age that you can start to receive the additional pension purchased with your APCs depends on when you retire.
- Retiring before NPA: If you access your pension before your NPA, or you are retired on redundancy or efficiency grounds before your NPA, the extra pension you have bought will be reduced for early payment, in line with your main scheme benefits.
- Ill health: If you retire on ill health (Tier 1 or Tier 2) and are paying regular contributions, then any ongoing APCs are deemed to be paid in full and you can take then from same date as your main scheme benefits.
- Retiring after NPA: If you draw your pension after your NPA, the amount of extra pension you have bought will be increased for late retirement in line with your main scheme benefits.
Your pension is a taxable income. As APCs are topping up your pension they are also liable for tax.
What else should I consider?
- APCs contribute to your own pension – they do not count towards any dependants' pensions.
- You must be under the age of 75 to pay by lump sum direct to GMPF and you will need to contact Her Majesty’s Revenue & Customs (HMRC) to arrange your tax relief.
- You can choose to stop paying APCs at any time by notifying us in writing.
- If you end your contract, leave or retire before completing APC payments, your contributions will stop and you will be credited with the extra pension that you have bought to that date.
- Like all pension contributions, APCs are subject to HMRC limits called the annual allowance and the lifetime allowance. Increasing your pension, particularly if you pay a one off lump sum payment, may result in a tax charge.
- If you choose to buy extra pension, your additional contributions could change, if the factors used to calculate the cost of buying the pension are changed by the Government. If this is the case we will notify you of the change in contribution amount.
Additional voluntary contributions (AVCs) are separate benefits that you build alongside your main scheme pension. Greater Manchester Pension Funds (GMPF) chosen provider is the Prudential.
Contributions are flexible and are paid to the Prudential directly out of your monthly salary. If you pay tax, you will receive tax relief on your contributions. You can pay up to 100 per cent of your pensionable pay into your AVC (subject to other deductions made by your employer). Like all pension contributions, AVCs are subject to Her Majesty’s Revenue and Customs (HMRC) limits on pension savings called the annual allowance and the lifetime allowance.
How do I contact Prudential?
To apply or find out more about AVCs please visit the Prudential website.
How do AVCs work?
You choose how much you want to contribute – either a regular payment or one off contribution.
Your contributions are invested and you can make a choice around the level of risk you take. As with all investments, the value may go down as well as up and you may not always get back what you have contributed. Prudential has produced a guide for the different funds you can invest in. The funds have been ranked according to their risk. If you prefer not to choose you will automatically be placed in the default investment option.
When you retire, you can choose how to take your AVCs from a range of options, which we’ve summarised for you.
When and how can I access AVCs?
You can normally access your AVCs from age 55, there are many ways to do this:
- Take up to 100 per cent of your AVC as a tax free lump sum - Providing you take your AVC at the same time as your GMPF pension, and the value of your AVC does not exceed 25 per cent of the overall value of your LGPS benefits you are taking.
- Buy an annuity from an AVC provider on the open market, or from Prudential via GMPF.
- Buy a top up LGPS pension (scheme annuity) - If you paid into the LGPS on or after 1 April 2014, you can use some or all of your AVCs to buy extra pension from GMPF. The extra pension you buy will increase in line with the cost of living each year.
- Buy extra membership in the LGPS - This only applies if you started paying into your AVC plan before 13 November 2001.
- Transfer your AVC fund to another pension scheme or arrangement - You may be able to transfer your AVC plan to one or more different pension arrangements; even if you are still paying into the main LGPS scheme. You must stop paying for all AVCs in LGPS employments before you can transfer your AVC plan. If you hold more than one AVC plan, you must transfer all or none of your plans (even if they are held with different LGPS funds).
Before we can proceed with any application in relation to your AVC benefits, you are required to attend an appointment with Pension Wise to discuss your options.
You can find out more about your options and book a Pension Wise appointment online or call them direct on 0800 138 3944 to book a phone or face to face appointment. You can also ask us to book a Pension Wise appointment for you.
You will need to confirm to us that you have either received Pension Wise guidance or have obtained financial advice from an FCA regulated adviser. Alternatively, you are able to opt out of receiving guidance. You can either call us or send back the declaration to confirm your choice.
What happens to my AVC if I die before taking it?
If you die before taking your AVCs, they will be payable as a lump sum. Prudential will pay the amount directly to GMPF. We will then make payment under the scheme rules. This is normally paid in the same way as your LGPS death grant.
We have provided a comparison table to help you to decide whether APCs or AVCs best suit your needs.
Additional Pension Contributions (APC)
Additional Voluntary Contributions (AVC)
Is the plan managed by GMPF?
No - this plan is managed by our chosen provider Prudential
Do I get tax relief on the contributions?
Yes – if you’re a tax payer
Yes – if you’re a tax payer
What am I purchasing?
Extra fixed amount of GMPF pension, some of which can be converted to a lump sum
A pension pot which can be accessed in a number of ways
Is there a maximum I can contribute?
Yes – currently up to £7,352 of extra annual pension*
Yes - up to 100 per cent of your salary*
Can I cancel my contract at any point?
Can I change my contract at any point?
How do I pay?
APCs can be paid in a lump sum via payroll, or directly to GMPF, or by regular contributions via your payroll.
AVCs are paid by regular contributions via your payroll.
Are the contributions flexible?
Can I transfer my contract out of the scheme?
No - as your APCs are part of your main scheme benefits. However, if you are able to transfer your main scheme benefits, the transfer will include your APC built up to the date you leave.
Yes** - to an approved HMRC scheme
If I pass away during the contract will it be paid?
Is the amount I have accrued so far included within my annual benefit statement?
* There are HMRC Pension Limits on the amount of pension you can build up before incurring a tax charge. These are called the Annual Allowance and the Lifetime Allowance. APCs and AVCs are both subject to these limits.
**Certain rules apply.