Additional pension contributions (APC)
APCs are additional contributions you can pay on top of your regular pension contributions to buy extra pension within the LGPS.
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What are APCs?
APCs are additional pension contributions you can pay on top of your regular contributions to buy extra pension within the LGPS.
In some circumstances, if you have been absent from work, your employer may help you buy back any lost pension via a Shared Cost APC.
Shared cost means the cost of buying the “lost” pension is shared between you and your employer. These are similar to an APC but your employer may require you to take a medical assessment (at your own expense) to confirm you’re fit enough to complete the payments.
Please speak with your employer for more information about Shared Cost APCs.
How do APCs work?
You pay additional contributions (either as a one-off lump sum or regular payments) to buy extra pension. Depending on how you choose to pay, your additional contributions are added to your pension account and adjusted (or revalued) in line with inflation at the end of each year.
When you retire, your extra pension is paid to you annually for the rest of your life, along with your main scheme benefits.
How much will it cost?
The cost of buying extra pension depends on a few factors including:
You can use the calculator on the LGPS website to calculate how much extra pension you’ll get in retirement (if you take it from your State Pension Age) and the regular cost to you now, depending on how you choose to pay.
The maximum amount of extra pension you can buy in a year is £7,579 (2023/24 rate). If you pay tax, you will get tax relief on the additional contributions you make.
You can use the calculator on the LGPS website to calculate your pension with any additional contributions you want to make. To do this, just follow the steps below.
1 Fill in your personal details in the boxes on the page and state whether you wish to pay additional contributions via regular payments or a lump sum.
2 State how much you wish to pay, or how much extra pension you wish to buy (as well as how often and for how many years, if you choose to make regular payments).
If you choose to pay with a lump sum, you will need to state whether you wish to pay via your payroll or directly to your fund. If you plan to pay via your payroll, you will get tax relief on the APCs you make, whereas if you pay the lump sum directly, you’ll need to claim tax relief from HMRC yourself.
Please note, the calculator allows you to add in the amount of APC that will be paid by your employer (if this has been agreed with them) but only include it if you have this in writing.
3 Click the Calculate button to calculate your pension. The results will show the:
- Total extra pension you’ll receive each year, if it’s taken from state pension age.
- Years of agreement and extra pension bought each year (if you’re making regular payments).
- Cost to you before tax relief (for regular payments or a lump sum).
- Cost to your employer.
- Total cost (for regular payments or a lump sum).
- Your Normal Pension Age.
If you want to make any adjustments (like to compare paying a lump sum with making regular payments), just click the Back button and complete the steps again.
How do I pay?
You can pay for APCs either by making regular payments from your salary or by paying a lump sum.
If you’re within 1 year or past your Normal Pension Age, you can’t choose regular payments and can only pay by lump sum.
If you choose to make regular payments, these will be taken from your salary each time you are paid.
Your additional contributions are added to your pension account and adjusted (or revalued) in line with inflation at the end of each year.
You can also choose how long you want to spread the cost of your payments. The minimum payment period is one year and the maximum is the number of complete years up to your Normal Pension Age (NPA). Your NPA is the same as your State Pension Age, which is at least 65.
You can choose to pay your lump sum directly to your pension fund (instead of your payroll department) or have it taken automatically from your salary.
If you choose to pay your lump sum directly to your pension fund, you can claim tax relief on your contributions but will need to arrange for this with HMRC yourself. You can do this via your self-assessment tax return or by contacting HMRC.
How can I apply?
What happens to my APCs when I retire?
Before you reach your Normal Pension Age (NPA), you will receive a quote of your total pension benefits, which includes the value of extra pension you have bought via APCs. Your NPA is the same as your State Pension Age, which is at least 65.
As with your main scheme benefits, you can choose to swap your extra pension for a tax-free lump sum. You can only take up to 25% of the total value of your pension (which includes your main scheme benefits and APCs) as a tax-free lump sum.
When and how you retire will affect the value of your APCs.
|When and how you retire
|What happens to your APC
|At your Normal Pension Age
|Your APCs (and your main scheme benefits) will be paid to you in full.
|Before your Normal Pension Age
|Your APCs (and your main scheme benefits) will be reduced as you are taking your pension early.
|Retiring on Tier 1 and Tier 2 ill health grounds
|Your APCs (alongside your main scheme benefits) will be paid to you in full.
|After your Normal Pension Age
|Your APCs (and your main scheme benefits) will be increased for retiring late.
- You must be in the main scheme of the LGPS. You cannot pay APCs if you are in the 50/50 section.
- The minimum period over which APCs can be paid is 12 months, unless you are making a one-off lump sum payment.
- APCs contribute to your own pension – they do not count towards any benefits for your dependents (like spouses or children).
- APCs count towards the maximum pension you can build up tax-free in a year. Most people will not exceed this limit but those that do will need to pay a tax charge. See our website for more details on annual allowance.
- 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 happens, we will notify you of the change in contribution amounts.
- If you leave your employment, opt out of the LGPS or retire before your agreed payment period, you will only be credited with the extra pension you have bought up to that date.
See how APCs have helped our members
Find out how paying additional pension contributions (APCs) helped Karen boost her pension while working term-time in a school.
Find more information about APCs on the LGPS website.
If you need help finding independent financial advice, here are some places to start: