Your pension finances

Find answers to our most frequently asked questions about contributing to your pension.

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Pension payments

Once you have completed your retirement application, we will process your benefits within 10 working days of us receiving all the required information from you and your employer. You’ll receive any lump sum shortly after and your first pension payment is usually paid at the end of the month.

Please note, this could be the following month, depending on when we receive your completed forms. We’ll let you know when your pensions payments will start.

The value of the pension you receive (once you’ve retired) is adjusted annually in line with the consumer price index (CPI). This is the official measure of inflation, based on hundreds of different goods and services. So if inflation goes up, so does your pension.

For more information about pension increases, click here

If you retired within the last 12 months, you will receive your first pension increase on a pro-rata basis (staggered throughout the year). The monthly increase depends on the date you retired. For details of the dates and percentages, click here

Your pension benefits are increased in line with inflation, which means that when inflation goes up, so does your pension.

Your pension is adjusted each April (the start of the financial year) to make sure it is in line with the consumer price index (CPI).

A CARE pension is based on a fraction of your pensionable pay, so if your pay reduces, the amount going into your pension account will reduce.

Final salary benefits are based on your full time equivalent pay in the last year of service – but there are protections in place if you received a higher rate of pay in a previous year.

If you’re part of an LGPS pension scheme, you might also find this document useful Protection following a reduction in pay

Your first pension payment is usually paid at the end of the month of your retirement date (the date you’ve agreed with your employer to retire).

This date can sometimes affect when you receive your first payment. If the date falls in the last week of the current month, it’s likely you’ll receive it at the end of the following month.

If you contribute to other pensions, please let us know so we can make sure the benefits you receive don’t go over the standard lifetime allowance. This is the maximum amount of pension benefits that HMRC allows you to receive without paying extra tax.

Tax on your pension

Your pension contributions are taken from your pre-tax salary. You will not be taxed on them. However, there is a limit on how much your pension benefits can increase by each year. This is known as the Annual Allowance. If your pension benefits increase by more than the annual allowance there may be a tax charge.

For more information, please see the FAQ, What is my lifetime allowance?

Depending on your situation, you may receive a tax-free lump sum when you retire, but your annual pension is taxed like any other kind of income you earn. Exceeding your lifetime allowance can also affect how much you’re taxed on your pension.

For more information, see the FAQ What is my lifetime allowance?

Depending on your situation, you may receive a tax-free lump sum when you retire (or you could choose to have a lump sum by sacrificing part of your annual pension). But if you exceed your lifetime allowance you may have to pay tax.

For more information, see the FAQ What is my lifetime allowance?

If we have received your P45 from your employer, we will apply the same tax code to your pension on a ‘month one’ basis. We will then notify HMRC as soon as the pension goes into payment and they will notify us of the correct tax code to use.

Your P60

A P60 is an annual statement that you receive at the end of the tax year (5 April). It shows the tax you’ve paid on your salary throughout the tax year (6 April to 5 April of the following year).

If you’re retired and taking your pension, you’ll also receive a P60 for the benefits you have received and paid tax on during that period.

You’ll need a P60 to prove how much tax you’ve paid on your salary. This might include to:

• Claim back overpaid tax.
• Apply for tax credits.
• Provide proof of your income, like if you apply for a loan or a mortgage.

If you’re receiving your pension from LPPA, you can access your P60 by downloading it via your online account.

Additional voluntary contributions (AVC)

An AVC is a way of building up a second pot of money to add to your existing Local Government pension, which you can take when you retire. The AVC provider will invest your contributions on your behalf.

To find out more about AVCs, visit our Additional voluntary contributions scheme page.

The LGPS offers an ‘in-house’ AVC. If you have an AVC, contributions will be taken from your salary and you will receive an annual statement from your AVC provider.

Each fund has a chosen in-house AVC provider who you will need to contact if you wish to arrange an ‘in-house’ AVC through the LGPS.

For more information, see our Additional voluntary contributions page.

Once we get notification of your retirement, we’ll contact your AVC provider to get a quote. You can then decide how you take your AVC benefits.

Please be aware, you can’t receive your pension until your AVC has been paid to you. For more information about AVCs, see our Additional voluntary contributions page.

If you have an AVC and you leave the LGPS before retirement, your contributions will stop, meaning you’ll also stop contributing to your AVC. But its value will continue to be invested with your provider until it is paid to you when you retire.

Alternatively, you can transfer your AVC to another provider or take it at the same time as your LGPS pension benefits.

To learn more about AVCs, visit our Additional voluntary contributions (AVCs) page

Additional pension contributions (APCs)

If you want to increase your Local Government, Police or Firefighters’ pension benefits, you have the option of taking out additional pension contributions (APCs). This will help you to increase the pension you’ll receive when you retire by a guaranteed amount.

The additional contributions increase the value of your pension. You can buy APCs either by making regular payments from your salary or by paying a lump sum, which are linked to your pay and length of service – your employer may also agree to make contributions.

Please note, there is an annual limit on how much additional pension you can buy via your APC. Plus, you can’t buy APCs if you’re in the 50/50 section of the Local Government Pension Scheme.

To take out an APC, you need to fill in an APC form (including stating the additional contributions you want to pay). To learn more about APCs, click here.

You’ll need to complete an APC form, which you can download here. But it’s important to make sure you get financial advice from a professional before you make any decisions.

When you reach retirement age you will be sent a quote of your pension benefits, which includes the value of any APCs you have bought. When and how you decide to retire will affect this value. For example, if you retire at normal pension age, your APCs will be paid in full, but if you retire earlier, they may be reduced.

If you have an APC you contribute to each month and you leave the LGPS, your pension will be credited with the total amount of additional pension you have paid for up to that point (Note – the same applies if you choose to stop paying your APC before the end of your agreed payment period).

If you have an APC and you have to retire because of ill health, you will be credited with the full amount of pension you agreed to buy.

To learn more about APCs, visit our Additional pension contributions (APCs) page

Added pension (Police and Firefighters)

The 50/50 option (LGPS only)

This allows you to reduce your benefits in the Local Government Pension Scheme by paying half the contributions of your pension for half the benefits.

Half the amount of pension contributions are taken each month in comparison to the main scheme. Your pension account then builds up at half the rate of the main scheme. But you are still entitled to full death benefits and ill health benefits.

If you’re looking to make savings, the 50/50 option is designed as a temporary measure, which avoids you having to completely opt out of the Local Government Pension Scheme. By halving your monthly contributions, less money is taken from your salary, but your pension continues to build up at half the rate.

You can switch between the main scheme and the 50/50 option as often as you like.

Annual allowance

This is the maximum amount of pension that HMRC allows you to build up in any one tax year without paying tax. For most people this is currently £40,000.

Please be aware that the 2023 Spring Budget has included plans to increase the annual allowance from £40,000 to £60,000 from 6 April 2023.

Learn more about your annual allowance

You’ll be charged tax on those pension savings that exceed your annual allowance. If you’re worried you’re close to exceeding your annual allowance, it’s a good idea to speak to a financial adviser.

Please be aware that the 2023 Spring Budget has included plans to increase the annual allowance from £40,000 to £60,000 from 6 April 2023.

Learn more about your annual allowance

We’ll write to you to let you know and tell you what you need to do.

Learn more about your annual allowance

Lifetime allowance

This is the maximum amount of pension benefits that HMRC allows you to receive without paying extra tax.

For most people, in the 2022-2023 tax year this is £1,073,100.

Please be aware that the 2023 Spring Budget has included plans to remove the lifetime allowance tax charge from 6 April 2023. But there will still be a tax-free lump sum limit of £268,275.

Yes, it had been frozen until the 2025-2026 tax year and was expected to change then.

Please be aware that the 2023 Spring Budget included plans to remove the lifetime allowance tax charge from 6 April 2023. The lifetime allowance will be fully abolished from the 2024-2025 tax year, through a future Finance Bill.

If you’re a Local Government Pension Scheme (LGPS) member, you can check this by using the Lifetime allowance quick check tool on the LGPS website.

Please be aware that the 2023 Spring Budget has included plans to remove the lifetime allowance tax charge from 6 April 2023 (there will still be a tax-free lump sum limit of £268,275). If you’re retiring before this date, you will still be assessed by the current level of lifetime allowance. For most people in the 2022-2023 tax year this is £1,073,100.

HMRC set this up in 2016 as a way to protect your lifetime allowance, depending on your circumstances. There are two different types of protection:

Individual – If your pension savings were worth more than £1 million on 5 April 2016.

Fixed – Fixes your lifetime allowance at £1.25 million, if you have not added to your pension since April 2016 or had opted out of any workplace pensions by then.

For more information, visit the GOV.UK web page, Protect your pension lifetime allowance.

Please be aware that the 2023 Spring Budget included plans to remove the lifetime allowance tax charge from 6 April 2023. The lifetime allowance will be fully abolished from the 2024-2025 tax year, through a future Finance Bill.

McCloud (Remedy)

McCloud (also known as Remedy) is an age discrimination ruling (McCloud was the name of the judge) that has had an impact on members of certain workplace pension schemes.

To find out more about Remedy, click here if you’re with the Police pension scheme, and click here if you’re with the Firefighters’ pension scheme.

We don’t yet have the details of how McCloud might affect members’ pensions. What we can say is that Local Government Pension Scheme (LGPS) members, who retired before 1 April 2014, won’t be affected. We will also be carrying out checks on Police and Fire scheme members once we have more details (expected in or after October 2023).

We will update our website with any key news updates, so make sure you check it regularly. We’ll also be contacting all Police and Firefighter members, who retired after 1 April 2015, once we know more (expected in or after October 2023).

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