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Increasing your Pension Benefits

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					        Increasing Your Pension Benefits




        A Guide for Members of the Local
          Government Pension Scheme




                     England and Wales Version – April 2006


Index                                               Page
Glossary                                                     3

Background                                                   6

Why should I consider increasing my pension benefits?            6

Are there any limits on how much I can contribute to         6
increase my pension benefits?

The options explained
- Pay additional contributions to purchase extra years of
   membership in the LGPS                                        8
- Make additional voluntary contributions (AVCs) via the
   LGPS to the scheme's AVC plan (commonly known as
   scheme AVCs or in-house AVCs)                             9
- Make free-standing additional voluntary contributions
   (FSAVCs) to a FSAVC provider of your personal choice     11
- Contribute to a concurrent personal pension plan or
   stakeholder pension scheme                               12
- Repay a previous refund of LGPS contributions.            13

Are there other alternative investments?                    14

Disclaimer                                                  14

Further information                                         14

Comparison table                                            15




                                                                 2
Glossary

Annual Allowance
This is the amount by which the value of your pension benefits may increase
in any one year (disregarding the year that that all your benefits become
payable) without having to pay income tax at 40% on the excess. The annual
allowance is set by the Treasury and for 2006/2007 is £215,000. Most
scheme members will not be affected by the annual allowance. For
calculating the increase in value of your LGPS benefits, the first year runs
from 6 April 2006 to 31 March 2007; subsequent years run from 1 April to 31
March. If you exceed the annual allowance in any year you are responsible
for reporting this to HM Revenue and Customs on your Self-assessment tax
return and for paying the annual allowance tax charge. Your administering
authority will be able to give you the information you require on the increase
in the value of your LGPS benefits including any additional voluntary
contribution (AVC) arrangement you may have. The assessment covers any
pension benefits you may have in all tax-registered pension arrangements –
not just the LGPS. Please note, however, that the annual allowance tax
charge will not apply if you have registered to have enhanced protection (but
only if you keep enhanced protection throughout the relevant tax year).

Civil partner
A civil partnership is a relationship between two people of the same sex ("civil
partners") which is formed when they register as civil partners of each other.

Final Pay
This is the figure used to calculate most of your pension benefits and is
normally your pay in the last year before you retire, or one of the previous two
years' pay if that amount is higher. For a part-time employee, the figure used
is normally the pay you would have received if you had worked whole-time. If
your pay is reduced because of sickness, the final pay is taken to be the pay
you would have received if you had not been sick. During any period of
maternity absence in respect of which you pay (or are deemed to have paid)
pension contributions, final pay includes the pay you would have received
had you not been on maternity absence.

Lifetime Allowance
This is the total capital value of all pension benefits you can have without
triggering an excess benefits tax charge. If the value of your pension benefits
when you draw them (not including any state retirement pension, state
pension credit or any spouse’s, civil partner’s or dependant’s pension you
may be entitled to) is more than the lifetime allowance, or more than any
primary lifetime allowance protection you may have, you will have to pay
tax on the excess benefits unless you have enhanced protection. The
lifetime allowance is set by the Treasury and for 2006/2007 is £1.5million.
The lifetime allowance covers any pension benefits you may have in all tax-
registered pension arrangements – not just the LGPS. Most scheme members
pension savings will be significantly less than the lifetime allowance. For
pensions that start to be drawn on or after 6 April 2006, the capital value of


                                                                               3
those pension benefits is calculated by multiplying your pension by 20 and
adding the lump sum – so, for example, an employee earning in excess of
£130,000 per annum and with 40 years membership in the LGPS could be
affected. For pensions already in payment prior to 6 April 2006, the capital
value of these is calculated by multiplying the current annual rate, including
any pensions increase, by 25. Any lump sum already paid is ignored in the
valuation.

Pay
This is your normal salary or wages plus any shift allowance, bonuses,
contractual overtime, Maternity Pay, Paternity Pay, Adoption Pay and any
other taxable benefit specified in your contract as being pensionable. Pay
does not include non-contractual overtime, travelling or subsistence
allowances, pay in lieu of notice, pay in lieu of loss of holidays, school
achievement awards, any payment as an inducement not to leave before the
payment is made, nor (apart from some historical cases) the monetary value
of a car or pay received in lieu of a car.

Primary lifetime allowance protection and enhanced protection
Primary protection is aimed at protecting benefits earned up to 5 April 2006
in respect of those high earners affected by the introduction of the lifetime
allowance from 6 April 2006. Under HM Revenue and Customs rules, if the
value of your pension benefits exceeds the lifetime allowance by 5 April
2006, you can register for primary protection so that you have an individual
lifetime allowance based on how much your benefits at 5 April 2006 exceed
the value of the standard lifetime allowance. Your individual lifetime
allowance increases at the same rate as the standard lifetime allowance.
You can also register for enhanced protection, as well as primary
protection, if the value of your pension benefits exceeds the lifetime
allowance by 5 April 2006, or you can register for enhanced protection if
you believe they may do so in the future. Under enhanced protection you do
not pay tax on benefits in excess of the lifetime allowance provided your
benefits at 5 April 2006 have not increased since then beyond certain limits (in
general terms, by more than the greater of 5% per annum, the increase in the
Retail Price Index or increases in your pensionable pay). If the limit is
exceeded, enhanced protection is lost so if you have enhanced protection
it is your responsibility to monitor the increase in your benefits and, if the limit
looks likely to be exceeded, take appropriate action if you wish to retain
enhanced protection. You will lose enhanced protection
if you pay contributions into a money purchase pension arrangement (e.g. pay
into the LGPS in house AVC facility1) or if you start a new pension
arrangement, or if you transfer your LGPS benefits to another defined benefit
pension scheme. You can also voluntarily give up enhanced protection by
giving notice that you no longer wish to keep it.


1
  A provision in the Finance Bill 2006 will ensure that those with enhanced protection will not
lose it if they are paying AVCs at 5 April 2006 purely for extra life assurance cover and carry
on doing so after that date provided the benefits remain those that would have been payable
under the policy at 5 April 2006 e.g. the member does not adjust the premiums to purchase
increased life assurance cover.


                                                                                                  4
If you lose enhanced protection you must notify HM Revenue and Customs
within 90 days. Failure to do so could result in a fine of up to £30,000.

You have to register with HM Revenue and Customs by 5 April 2009 if you
wish to obtain primary or enhanced protection. The relevant forms are
available at http://www.hmrc.gov.uk/pensionschemes/protection.htm

Unsecured pension
Rather than purchasing an annuity, you can opt to take an unsecured pension
provided direct from a Free-Standing AVC, Stakeholder or Personal Pension
fund (if the rules of the scheme permit this) as income withdrawals (previously
called Income drawdown). If the income withdrawal option is taken, you must
withdraw income from the fund during the whole of the period you defer
purchasing an annuity (up to the eve of your 75th birthday at the latest).




Increasing Your Pension Benefits
Background




                                                                              5
Since 6 April 2001 members of the Local Government Pension Scheme
(LGPS) have had the following choices to consider when deciding how to
increase their benefits via a pension arrangement:

   purchasing extra years of membership (commonly known as 'added
    years') in the LGPS
   paying additional voluntary contributions (AVCs) via the LGPS to the
    scheme's AVC plan (commonly known as scheme AVCs or in-house
    AVCs)
   paying free-standing additional voluntary contributions (FSAVCs) to a
    FSAVC provider of your personal choice
   paying contributions to a concurrent stakeholder pension scheme
   paying contributions to a concurrent personal pension scheme
   repaying contributions previously refunded under the LGPS

Not all of the above alternatives will apply to every individual.

This booklet sets out to provide you with basic information on each of the
above options. The meaning of words in bold type in the text of the booklet
are explained in the glossary at the front of this booklet. A useful table
comparing the main options is also included.

Why should I consider increasing my pension benefits?

Most of us look forward to a happy and comfortable retirement and in order to
have that little bit extra during your retirement years it is worth considering
paying extra contributions, which are a tax efficient way of topping up your
income in retirement.

It should be noted that extra contributions can also be paid to increase the
level of a spouse's or civil partner’s pension payable, or to increase the
amount of the lump sum payable, if you die in service.

Are there any limits on how much I can contribute to increase my
pension benefits?

There is no limit on the amount of contributions you can pay, although there is
a limit on the number of added years you can buy in the Scheme. However,
you can only receive tax relief on contributions up to 100% of your taxable
earnings. Additionally, unless you have enhanced protection, there will be a
tax charge if in any year, other than the year in which all your pension benefits
have become payable, the value of your pension savings has increased in
excess of the annual allowance or if, when you draw your benefits, the value
of all your pension savings exceeds the lifetime allowance. Tax will be
payable on any excess amount.

As your normal LGPS contributions are either 6% or 5% this leaves a
significant proportion of your taxable earnings that you can invest in additional
contributions or AVCs, although from 6 April 2006 the additional years of



                                                                                6
membership in the LGPS you may opt to purchase is limited to 6 years 243
days.

The following sections provide you with details on the various options
available.




                                                                           7
The Options Explained
Pay additional contributions to purchase extra years of membership in
the LGPS.

This option allows you to purchase additional years of membership in the
LGPS.

From 6 April 2006, the maximum number of additional years you may opt to
purchase is 6 years 243 days. Contributions to purchase additional years of
membership in the LGPS are deducted direct from your pay and the tax relief
(at your highest rate) is automatically given through the payroll. This means
that tax is calculated on your pay after your pension contributions have been
deducted.

If you elect to pay additional contributions to purchase extra membership in
the LGPS, you will start paying the additional contributions from your next
birthday. The contributions would be due to cease on the day before your 65 th
birthday (or, in some cases, on an earlier date where the contract to pay
additional contributions was taken out before 1 October 2006).

The amount of contributions you pay will depend on your age when you start
paying the additional contributions and the number of additional years of
membership you wish to purchase. A quote can be obtained by writing to the
Pensions Section (see address on page 14). You should note that, before an
election to pay additional contributions can be accepted, you may be required
to produce, at your own expense, a medical report from a registered medical
practitioner to show that you are in reasonably good health.

If, whilst paying additional contributions, you go on sick leave with reduced or
no pay, your contributions will be deemed to have been paid in full. However,
during any other period of absence you will be required to continue paying the
additional contributions in full.

The additional years of membership will count towards any minimum period of
membership you are required to have under the LGPS to be entitled to a
benefit
and will count in working out the amount of your benefits when you leave /
retire.

So, if you decide to purchase additional years of membership in the LGPS
you will not only know what percentage of your pay it will cost you each
month, but you will also know what proportion of your final pay you will
receive in return for the additional contributions.

You may choose to cease paying additional contributions at any time by
giving written notice of your wish to do so to both the authority administering
the pension fund and to your employer. You would be credited with the




                                                                                  8
proportion purchased to the date of cessation2.
If you leave (other than on the grounds of permanent ill health) before
completion of the contract to purchase additional years of membership you
will be credited with the proportion purchased to the date of cessation.
However, if within 12 months of leaving you move to another employer that
participates in the LGPS you will be able to continue paying the additional
contributions provided, within 3 months of rejoining the LGPS, you pay the
additional contributions that would have been due in respect of the period of
any break between the employments.

However, if you are retired on grounds of permanent ill health or you die in
service while paying additional contributions to increase your membership, the
contributions will be deemed to be fully paid. This means that the full amount
of additional membership being purchased will be used in the calculation of
the benefits due.

Should you be made redundant or retire on grounds of efficiency at least 12
months after you elected to pay additional contributions, you will be given the
opportunity to pay the remaining contributions due in a lump sum. If you
choose not to do so, you will be credited with the proportion purchased to the
date of redundancy or retirement on the grounds of efficiency.

To pay additional voluntary contributions (AVCs) via the LGPS to the
scheme's AVC plan (commonly known as scheme AVCs or in-house
AVCs)

If you choose to pay AVCs under the LGPS, the AVCs are invested
separately in funds managed by an insurance company or building society.
You have your own personal account that, over time, builds up with your
contributions and the returns on your investment which are free of capital
gains tax.

You may be offered a range of AVC investment routes. For example, you may
be able to invest your contributions in a 'with-profits' fund, a 'unit-linked' fund,
a 'deposit' fund, an 'ethical' fund, a 'lifestyle' fund, an index 'tracker' fund etc.
or a combination of funds. It is for you to choose which fund, or combination of
funds, you wish to have your contributions invested in. Your decision is likely
to be influenced by factors such as your attitude to investment risk and how
close you are to retirement.

An election to pay AVCs must be made in writing. . Payments commence
from the next available pay day after your election has been accepted and
you may vary or cease payment at any time whilst you are contributing to the
LGPS. The authority administering the pension fund may specify a minimum
contribution that must be paid.

AVCs are deducted direct from your pay and the tax relief (at your highest

2
 If you then wished to re-commence payment you would be required to take out a new
contract which could not start until your next birthday and the contribution rate for which would
be higher (as it is linked to your age on taking out the contract).


                                                                                               9
rate) is automatically given through the payroll. This means that tax is
calculated on your pay after your pension and AVC contributions have been
deducted.

You may be able to transfer any previously accrued FSAVCs and in house
AVC funds in another scheme to an LGPS in house AVC scheme while you
are a contributing member of the LGPS.

At retirement the accumulated fund in your account is used to buy you an
annuity from an insurance company, bank or building society (but you can
defer purchasing an annuity until the eve of your 75th birthday at the latest). If
you work beyond age 65 you will not be able to purchase an annuity until you
stop working and retire, or you reach the eve of your 75th birthday, or you
have your employer’s consent for flexible retirement, whichever occurs first.

The annuity can be bought from the insurance company or building society
with whom the AVCs were invested. Alternatively, it can be purchased from
another annuity provider so that you can benefit from the best annuity rates
available at the time.

An annuity is an amount of additional pension benefit. When you buy an
annuity you can choose the type of pension that best suits your
circumstances. For example, you could buy a flat rate annuity (i.e. one that
never increases), one that is increased each year by a fixed rate, or one that
increases in line with the Retail Prices Index. You can choose whether to
include a prospective widow's / widower's / civil partner’s pension (should
you predecease your spouse / civil partner). Clearly, the level of the annuity
will, in part, depend on which of the above elements you wish to include.

Annuities are subject to annuity rates which in turn are affected by interest
rates. When interest rates rise, the organisation selling annuities is able to
obtain a greater income from each pound in your AVC fund, and therefore can
provide a higher pension. Conversely a fall in interest rates reduces the
pension which can be purchased.

Alternatively, upon leaving the LGPS with an immediate payment of pension
benefits you will be able to use the accumulated fund in your AVC account to
buy a top-up pension from the LGPS. This will provide an inflation proofed
pension and dependants' benefits.

You can use part of your accumulated fund to buy a top-up pension from the
LGPS and the balance of your fund to purchase an annuity.

In certain circumstances, such as retirement on ill health grounds or cessation
of payment of AVCs before retirement, the LGPS currently makes provision
for members to opt to convert AVCs into LGPS membership provided you
commenced payment of the AVCs prior to 13 November 2001.

You can even take your AVC fund as cash. At retirement, you can take all or
part of the accumulated fund in your in house AVC as a tax free lump sum if


                                                                                10
you draw it at the same time as your LGPS pension benefits, provided when
added to the LGPS lump sum it does not exceed 25% of the overall value of
your LGPS benefits (including your AVC fund) or, if less, 25% of the lifetime
allowance less an adjustment for the value of any other pension benefits you
are already drawing. If you defer drawing your AVC, you can draw up to 25%
of the value of your AVC fund as a tax free lump sum at the time you decide
to take benefits from your AVC fund.

Whilst you are in the LGPS you can also pay AVCs to increase your death in
service lump sum cover over and above the two times final pay provided by
the LGPS, or to provide additional dependants’ benefits.

If you take out an AVC for additional death benefits you may be asked to
complete a medical questionnaire and you may be asked to undergo a
medical examination at your own expense before your election is accepted.

More information on AVCs, including an application form, is available from the
Pensions Section (see address on page 14).

There will be a tax charge if in any year, other than the year in which all your
pension benefits have become payable, the value of all your pension savings
has increased in excess of the annual allowance or if, when you draw your
benefits, the value of all your pension savings exceeds the lifetime
allowance or any primary lifetime allowance protection you may have. Tax
will be payable on any excess amount (unless you have enhanced
protection).

Under the LGPS your employer may establish a shared cost AVC
arrangement (SCAVC) to which, at your option, both you and your employer
contribute. The establishment of such an arrangement is at the employer's
discretion and your employer’s policy with regard to it must be included in
their Policy Statement (a copy of which you can ask for).

To pay free-standing additional voluntary contributions (FSAVCs) to a
FSAVC provider of your personal choice

FSAVCs work in much the same way as AVCs under the LGPS. However,
there are some important differences. These are:
 You must choose (and monitor) the financial institution to invest your
   FSAVCs. The main features for consideration would include contract
   charges (policy fees, annual management charges, bid / offer spreads,
   location rates), the types of investment routes on offer, historical
   investment performance, the financial strength of the provider, and the
   provider's long term commitment to the FSAVC market. You would also
   wish to ascertain whether there is a minimum payment, how often you can
   choose to vary the amount of your FSAVC and whether there are any
   charges for doing so, whether there are any penalties for stopping
   payment of FSAVCs or for transferring to another scheme, and whether
   there are any penalties for purchasing an annuity on the open market
   rather than with the organisation to whom you had paid the FSAVCs.


                                                                             11
   You must make the necessary arrangements. Contributions will not be
    deducted from your pay. Instead, you will need to make arrangements to
    pay contributions to the FSAVC provider e.g. by a standing order or direct
    debit mandate from your bank or building society account. The FSAVC
    provider will claim the basic rate tax relief from HM Revenue and Customs
    and credit it to your FSAVC contract. If you are a higher rate tax payer you
    will need to claim the higher rate tax relief on your annual tax return.

   FSAVCs can be drawn at any time from age 503 up to the eve of your 75th
    birthday regardless of whether or not you have retired and are drawing
    your LGPS pension. The accumulated fund in your FSAVC account is
    usually used to buy you an annuity from an insurance company, bank or
    building society but, if the scheme rules permit, you can opt for an
    unsecured pension if you defer the purchase of an annuity.

   FSAVCs cannot be transferred directly into the LGPS to purchase
    membership whereas, in certain circumstances, AVCs can.

   AVCs cease on leaving the LGPS (but the value of your AVCs can be
    transferred to another scheme if you transfer your LGPS benefits) but
    FSAVCs can carry on being paid into the same contract provided you
    rejoin another occupational pension scheme.

   Only 25% of the value of the FSAVC fund can be taken as a tax free lump
    sum at the time you decide to take benefits from your FSAVC fund.


To contribute to a concurrent personal pension plan or stakeholder
pension scheme

You may, if you wish, be a member of the LGPS and make your own
arrangements to pay contributions from the same earnings to a personal
pension plan or stakeholder pension scheme.

If you choose to also pay into a stakeholder or personal pension scheme, the
contributions you make to it are invested in funds managed by an insurance
company. You have your own personal account that, over time, builds up with
your contributions and the returns on your investment.

Stakeholder pension schemes will have to satisfy minimum standards relating
to the maximum charge that can be made and there should be no penalties
on discontinuing membership. This does not apply to personal pension
schemes.


3
 Schemes are required to increase the earliest age that benefits can be drawn from age 50 to
age 55 by 2010. Benefits can be drawn from an earlier age on the grounds of incapacity i.e.
physical or mental impairment.



                                                                                         12
If you choose to contribute to a stakeholder or personal pension scheme you
must make the necessary arrangements. Contributions will not be deducted
from your pay (unless your employer voluntarily agrees to do so). Instead, you
will need to make arrangements to pay contributions to the provider e.g. by a
standing order or direct debit mandate from your bank or building society
account. The provider will claim the basic rate tax relief from HM Revenue
and Customs and credit it to your personal fund. If you are a higher rate tax
payer you will need to claim the higher rate tax relief on your annual tax
return.

Benefits from a Stakeholder or personal pension scheme can be drawn at any
time from age 503 up to the eve of your 75th birthday regardless of whether or
not you have retired and are drawing your LGPS pension. The accumulated
fund in your stakeholder or personal pension account is usually used to buy
you an annuity from an insurance company, bank or building society but, if the
scheme rules permit, you can opt for an unsecured pension if you defer the
purchase of an annuity. The annuity can be bought from the insurance
company with whom you invested your contributions. Alternatively, it can be
purchased from another annuity provider so that you can benefit from the best
annuity rates available at the time. It should be noted that up to 25% of your
accumulated fund may be taken as a tax free lump sum on retirement or, if
less, 25% of the lifetime allowance less an adjustment for the value of any
other pension benefits you are already drawing.

An annuity is an amount of additional pension benefit. When you buy an
annuity you can choose the type of pension that best suits your
circumstances. For example, you could buy a flat rate annuity (i.e. one that
never increases), one that is increased each year by a fixed rate, or one that
increases in line with the Retail Prices Index. You can choose whether to
include a prospective widow's / widower's / civil partner’s pension (should
you predecease your spouse / civil partner). Clearly, the level of the annuity
will, in part, depend on which of the above elements you wish to include.

Annuities are subject to annuity rates which in turn are affected by interest
rates. When interest rates rise, the organisation selling annuities is able to
obtain a greater income from each pound in your personal fund, and therefore
can provide a higher pension. Conversely a fall in interest rates reduces the
pension which can be purchased.

To repay a previous refund of LGPS contributions.

If you ceased Local Government employment between 1st April 1974 and 31st
December 1979 with less than five years membership in the LGPS and you
claimed a refund of contributions, you may repay the refund plus interest. The
repayment must be made within six months of re-joining the LGPS, or such
longer period as your current and former administering authority may allow.

3
 Schemes are required to increase the earliest age that benefits can be drawn from age 50 to
age 55 by 2010. Benefits can be drawn from an earlier age on the grounds of incapacity i.e.
physical or mental impairment.



                                                                                         13
This is an administering authority discretion; you can ask your current and
former administering authorities what their policies are on this matter. Once
the repayment has been made, the period of membership will again count for
pension purposes.




Are there other alternative investments?
Individuals often have to consider whether they should top up their pension
benefits or, in addition to their basic contributions to the LGPS, save for
retirement through an alternative medium e.g. National Savings, Individual
Savings Accounts (ISAs), Offshore investments, venture capital trusts, etc.
which have some forms of in-built tax advantage. To some extent the decision
will depend upon the objectives of each individual. The aforementioned list is
by no means exhaustive and should not be seen in any way as an
endorsement of the product. Individuals should seek their own
independent financial advice.

Disclaimer
The information in this booklet is based on our understanding, at the date of
printing, of current pensions and taxation legislation, and of HM Revenue and
Customs practice, all of which are liable to change.

The Pensions Section is not authorised under the Financial Services Act to
give scheme members individual advice. If you wish to receive individual and
independent advice you may wish to talk to a registered independent financial
adviser. You will personally need to meet the cost of any charges made for
the advice.

Further Information
Further information about LGPS AVCs is available from [ Authority to insert
contact address, telephone number(s), fax number(s), e-mail addresses, etc].
The Pensions Section will also be pleased to provide an individual quotation
on the purchase of additional years of membership in the LGPS.

You can obtain information on a wide range of financial topics, including how
to go about finding a financial adviser, from the Financial Services Authority.
Call the FSA Consumer Helpline on 0845 606 1234 or visit the FSA
Consumer Help website at www.fsa.gov.uk/consumer

There is a DSS booklet entitled 'Stakeholder Pensions - Your Guide (PM8)'
available by telephoning 0845 7 31 32 33 or on-line from
www.pensionguide.gov.uk
General note: In certain circumstances people who left the LGPS between 1.4.74. and
31.12.79. with less than 5 years membership of the scheme, and who took a refund of
contributions, may repay that refund in order to again count the service. For further
information see the main guide.




                                                                                        14
Comparison table
                LGPS added years             LGPS AVC                 Free-standing AVC        Concurrent                  Concurrent personal
                                                                                               stakeholder                 pension
Charges         None                         [Authority to insert     Charges are              Annual charge of 1%         Charges are
                                             details]. These may      determined by the        or less of your fund        determined by the
                                             be lower than for        provider. They may                                   provider. They may be
                                             FSAVCs.                  be more expensive                                    more expensive than
                                                                      than LGPS AVCs and                                   LGPS AVCs and may
                                                                      may be more than the                                 be more than the
                                                                      maximum 1%                                           maximum 1%
                                                                      stakeholder charges.                                 stakeholder charges.
Employer        None                        None (unless the          None                 None                            None
contributions                               employer operates a
                                            Shared Cost AVC -
                                            delete or enter details
                                            as appropriate)
Employee        Tax relief will be given on Tax relief will be        Tax relief will be       Tax relief will be given    Tax relief will be given
contributions   contributions up to 100% of given on                  given on contributions   on contributions up to      on contributions up to
                your taxable earnings       contributions up to       up to 100% of your       100% of your taxable        100% of your taxable
                less the amount of any      100% of your taxable      taxable earnings less    earnings (or £3,600         earnings (or £3,600
                basic LGPS contributions    earnings less the         the amount               per year if greater) less   per year if greater) less
                or AVCs and contributions amount contributed          contributed to the       the amount contributed      the amount contributed
                to any other tax approved   to the LGPS and to        LGPS and to any          to the LGPS and any         to the LGPS any other
                pension arrangements. If    any other tax             AVCs or other tax        other a tax approved        tax approved pension
                the value of your pension   approved pension          approved pension         pension arrangements.       arrangements. If the
                savings increases in        arrangements. If the      arrangements. If the     If the value of your        value of your pension
                excess of the annual        value of your pension     value of your pension    pension savings             savings increases in
                allowance or the lifetime   savings increases in      savings increases in     increases in excess of      excess of the annual
                allowance, tax is payable   excess of the annual      excess of the annual     the annual allowance        allowance or the
                on the excess unless you    allowance or the          allowance or the         or the lifetime             lifetime allowance,
                have enhanced               lifetime allowance,       lifetime allowance,      allowance, tax is           tax is payable on the
                protection.                 tax is payable on the     tax is payable on the    payable on the excess       excess unless you
                                            excess unless you         excess unless you        unless you have             have enhanced
                                            have enhanced             have enhanced            enhanced protection.        protection.

                                                                                                                                                 15
                                             protection.           protection.
                LGPS added years             LGPS AVC              Free-standing AVC          Concurrent                  Concurrent personal
                                                                                              stakeholder                 pension
Method of       Deducted from pay on the     Deducted from pay     Usually via, for           Usually via, for            Usually via, for
paying          payroll                      on the payroll        example, a direct          example, a direct debit     example, a direct debit
contributions                                                      debit or standing          or standing order from      or standing order from
                                                                   order from your bank       your bank or building       your bank or building
                                                                   or building society        society account             society account
                                                                   account
Method of       Tax relief given at source   Tax relief given at   Basic rate tax relief is   Basic rate tax relief is    Basic rate tax relief is
claiming tax    through the payroll          source through the    claimed back by the        claimed back by the         claimed back by the
relief                                       payroll               FSAVC provider and         stakeholder provider        personal pension
                                                                   added to the FSAVC         and added to the            provider and added to
                                                                   fund. Higher rate tax      stakeholder fund.           the personal pension
                                                                   relief is claimed          Higher rate tax relief is   fund. Higher rate tax
                                                                   through the member's       claimed through the         relief is claimed
                                                                   tax return resulting in    member's tax return         through the member's
                                                                   an adjustment to the       resulting in an             tax return resulting in
                                                                   tax code.                  adjustment to the tax       an adjustment to the
                                                                                              code or by filling in       tax code or by filling in
                                                                                              form PP120 (available       form PP120 (available
                                                                                              from tax offices or the     from tax offices or the
                                                                                              stakeholder                 personal pension
                                                                                              administrator).             administrator).




                                                                                                                                                16
                 LGPS added years               LGPS AVC                 Free-standing AVC      Concurrent                 Concurrent personal
                                                                                                stakeholder                pension
Flexibility of   Contributions are deducted     Contributions can be     Contributions are      Contributions are paid     Contributions are paid
contributions    as a percentage of pay.        deducted as a            paid as a specified    as a specified flat sum.   as a specified flat sum.
                 They start on a birthday       percentage of            flat sum. Member can   Member can stop,           Member can stop,
                 and finish at age 65 (could    earnings or as a         stop, start, or vary   start, or vary             start, or vary
                 be earlier if contract taken   specified flat sum.      contributions (but     contributions without      contributions (but there
                 out before 1 October           Member can stop,         there may be a         penalty (but there may     may be a minimum
                 2006). Can opt to cease        start, or vary           minimum contribution   be a minimum               contribution and / or
                 payment at any time. A         contributions (but       and / or charges       contribution)              charges)
                 new contract would then        there may be a           imposed)
                 be more expensive due to       minimum contribution
                 age of the member.             and / or charges
                                                imposed - authority to
                                                insert details or
                                                delete as
                                                appropriate)
Investment       Not applicable                 Restricted to the        Wide investment       Any fund offered by         Any fund offered by
choice                                          investment choices       selection at member's the stakeholder             the personal pension
                                                offered by the LGPS      own choice            pension scheme              scheme
                                                AVC facility
Investment       Not applicable                 Uncertain                Uncertain              Uncertain                  Uncertain
performance




                                                                                                                                                17
              LGPS added years             LGPS AVC                Free-standing AVC       Concurrent                 Concurrent personal
                                                                                           stakeholder                pension
Guarantees    Benefits are guaranteed as   The benefits are        The benefits are        The benefits are           The benefits are
              a proportion of final pay    money purchase and      money purchase and money purchase and              money purchase and
                                           so depend on the        so depend on the        so depend on the           so depend on the
                                           amount contributed,     amount contributed,     amount contributed,        amount contributed,
                                           the investment          the investment          the investment             the investment
                                           performance, the        performance, the        performance, the level     performance, the level
                                           level of charges, and   level of charges, and of charges, and the          of charges, and the
                                           the annuity rate at     the annuity rate at the annuity rate at the time   annuity rate at the time
                                           the time the annuity    time the annuity        the annuity (pension)      the annuity (pension)
                                           (pension) is            (pension) is            is purchased               is purchased
                                           purchased               purchased
Ability to    Can only be transferred if   Only if main LGPS       Can be transferred to Can be transferred to        Can be transferred to
transfer on   /when the main LGPS          benefits are            another pension         another pension            another pension
changing      benefits are transferred     transferred. AVCs       scheme.                 scheme.                    scheme.
jobs                                       must then be            FSAVCs can              Contributions can          Contributions can
                                           transferred unless      continue if the         continue to be paid to     continue to be paid to
                                           the transfer is to      member enters new       a Stakeholder Pension      a Personal Pension
                                           another LGPS fund       pensionable             Scheme regardless of       Scheme regardless of
                                                                   employment              whether or not the         whether or not the
                                                                                           member is earning or       member is earning or
                                                                                           enters new                 enters new
                                                                                           pensionable                pensionable
                                                                                           employment.                employment.




                                                                                                                                           18
                  LGPS added years                  LGPS AVC                    Free-standing AVC            Concurrent                   Concurrent personal
                                                                                                             stakeholder                  pension
When can          At the same time as the   At the same time as                 At any time from age         At any time from age         At any time from age
benefits be       main LGPS benefits are    the main LGPS                       504 up to eve of your        504 up to eve of your        504 up to eve of your
taken?            paid                      benefits are paid or                75th birthday.               75th birthday                75th birthday
                                            from any later time
                                            (up to eve of your
                                            75th birthday)
Maximum            No maximum. If, when you No maximum. If,                     No maximum. If,              No maximum. If, when         No maximum. If, when
benefits          draw your benefits, the   when you draw your                  when you draw your           you draw your                you draw your
payable           value of all your pension benefits, the value of              benefits, the value of       benefits, the value of       benefits, the value of
                  savings exceeds the       all your pension                    all your pension             all your pension             all your pension
                  lifetime allowance or any savings exceeds the                 savings exceeds the          savings exceeds the          savings exceeds the
                  primary lifetime          lifetime allowance                  lifetime allowance or        lifetime allowance or        lifetime allowance or
                  allowance protection you or any primary                       any primary lifetime         any primary lifetime         any primary lifetime
                  may have, tax will be     lifetime allowance                  allowance                    allowance protection         allowance protection
                  payable on any excess     protection you may                  protection you may           you may have, tax will       you may have, tax will
                  amount (unless you have   have, tax will be                   have, tax will be            be payable on any            be payable on any
                  enhanced protection).     payable on any                      payable on any               excess amount (unless        excess amount (unless
                                            excess amount                       excess amount                you have enhanced            you have enhanced
                                            (unless you have                    (unless you have             protection).                 protection).
                                            enhanced                            enhanced
                                            protection).                        protection).




4
 Schemes are required to increase the earliest age that benefits can be drawn from age 50 to age 55 by 2010. Benefits can be drawn from an earlier age on the grounds
of incapacity i.e. physical or mental impairment.




                                                                                                                                                                  19
                LGPS added years              LGPS AVC                 Free-standing AVC         Concurrent                  Concurrent personal
                                                                                                 stakeholder                 pension
Form of         Fully inflation proofed       Annuity (i.e. a          Annuity (i.e. a           Annuity (i.e. a pension)    Annuity (i.e. a pension)
benefits        pension (with a built in      pension). The annuity    pension) or, if the       or, if the scheme rules     or, if the scheme rules
                prospective widow's /         type annuity is at the   scheme rules allow,       allow, an unsecured         allow, an unsecured
(note: all      widower's / civil partner’s   member's choice e.g.     an unsecured              pension. The type of        pension. The type of
except added pension) and a tax free          flat rate, fixed         pension. The type of      annuity is at the           annuity is at the
years can be lump sum                         increase or inflation    annuity is at the         member's choice e.g.        member's choice e.g.
used to                                       proofed annuity;         member's choice e.g.      flat rate, fixed increase   flat rate, fixed increase
provide                                       inclusive or exclusive   flat rate, fixed          or inflation proofed        or inflation proofed
additional life                               of, say, a prospective   increase or inflation     annuity; inclusive or       annuity; inclusive or
assurance                                     widow's, widower's or    proofed annuity;          exclusive of, say, a        exclusive of, say, a
cover on                                      civil partner’s          inclusive or exclusive    prospective widow's,        prospective widow's,
death in                                      pension.                 of, say, a prospective    widower's or civil          widower's or civil
service)                                      Alternatively, upon      widow's, widower's or     partner’s pension. Up       partner’s pension. Up
                                              leaving the LGPS         civil partner’s           to 25% of the               to 25% of the
                                              with immediate           pension. Up to 25%        accumulated fund can        accumulated fund can
                                              payment of pension       of the accumulated        be taken as a tax free      be taken as a tax free
                                              benefits a member        fund can be taken as      lump sum or, if less,       lump sum or, if less,
                                              can buy a top-up         a tax free lump sum       25% of the lifetime         25% of the lifetime
                                              pension from the         or, if less, 25% of the   allowance less an           allowance less an
                                              LGPS or use part of      lifetime allowance        adjustment for the          adjustment for the
                                              the accumulated fund     less an adjustment        value of any other          value of any other
                                              to buy a top-up          for the value of any      pension benefits you        pension benefits you
                                              pension from the         other pension             are already drawing         are already drawing
                                              LGPS and part to         benefits you are
                                              purchase an annuity.     already drawing
                                              A top -up pension
                                              from the LGPS will
                                              provide an inflation
                                              proofed pension,
                                              dependants' benefits
                                              and a 5 year pension

                                                                                                                                                   20
guarantee. In some
circumstances the
AVC 'pot' can be
transferred into the
LGPS to purchase
extra membership in
the main scheme
provided the payment
of AVCs commenced
prior to 13.11.01. At
retirement, you can
take up to 100% of
the accumulated fund
as a tax free lump
sum if you draw it at
the same time as
your LGPS pension
benefits, provided
when added to the
LGPS lump sum it
does not exceed 25%
of the overall value of
your LGPS benefits
(including your AVC
fund) or, if less, 25%
of the lifetime
allowance less an
adjustment for the
value of any other
pension benefits you
are already drawing.
If you defer drawing
your AVC, you can
draw up to 25% of
the value of your
AVC fund as a tax

                          21
free lump sum at the
time you decide to
take benefits from
your AVC fund.




                       22

				
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