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). This means it is adjusted proportionally based on how many months your pension has been paid to you.
The monthly increase depends on the date you retired. For example, if you retired mid-year, your first increase may be half of the annual increase. See the latest pro rata rates 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 HMRC limits. HMRC limit the value of the total tax-free lump sums you can receive from all pension schemes at £268,275. So, you will need to provide evidence of any tax-free lump sum taken from your first pension before you claim a second tax free lump sum.
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 annual 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. HMRC limit the amount of tax-free lump sum at £268,275 for most members for all schemes. If you are affected, we will provide you with full details when you retire.
Depending on your situation, you may receive a tax-free lump sum when you retire but HMRC limit the amount of tax-free lump sum at £268,275 for most members for all schemes. If you are affected, we will provide you with full details when you retire.
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.
If you’re receiving your pension from LPPA, you can access your P60 by downloading it via your online account.
Additional voluntary contributions (AVC)
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.
It’s when an AVC provider stops investing your AVC in your chosen investment fund, such as stocks and shares. Once the value is frozen it allows us to work out any pension benefits accurately.
To learn more about AVCs, please visit our Additional Voluntary Contributions (AVCs) page.
If you have taken out an AVC, it must be disinvested before we can arrange your pension payments. Here’s how it works:
- We ask your AVC provider to disinvest the AVC on your chosen date – usually your retirement date. If we have everything we need, we can send the request to your provider before your retirement date to help avoid delays to your pension.
- Your AVC provider stops investing the AVC on the date requested and usually sends the money to your pension fund (but you may receive this directly, depending on your fund).
- Your pension fund lets us know when they have received your AVC money (or your AVC provider lets us know if they’ve sent you the money directly).
- We process your pension payments and include the AVC value in your lump sum payment (if this is what you requested). Note, there are different ways you can take your AVC, depending on your circumstances.
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)
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)
If you’re the member of a police or firefighters’ scheme, you can buy extra pension benefits, called added pension, by paying additional contributions on top of your normal contributions.
To learn more, visit our Added pension page
To take added pension, you’ll have completed a form from us (with a quote showing how much added pension your contributions would buy).
To learn more about added pension, click here
You can apply for added pension if you’re a member of a police or firefighter pension scheme. You just need to contact us and we will send you a quote (showing how much added pension your contributions would buy) and a form to complete and return to us.
Once we’ve received your form, we will set up your added pension payment, which you can either pay as a one-off lump sum or by regular contributions.
To learn more about added pension, visit our Added pension page
When you retire, your added pension is paid to you annually for the rest of your life, as part of your main 2015 scheme benefits.
To learn more about added pension, visit our Added pension page
If you pay added pension contributions monthly and you leave your scheme or opt out, your contributions will stop, meaning you’ll also stop contributing to your added pension.
Your added pension contributions will also stop if you exceed the limit for your scheme in a year, or if you choose to stop paying them.
If your added pension contributions stop before the end of your agreed payment period, you’ll receive a portion of the extra CARE pension you originally chose to buy.
To learn more about added pension, click here
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 £60,000.
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.
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
The LTA was the maximum amount of pension benefits that HMRC allowed you to receive without paying extra tax. But as of 6 April 2024, the lifetime allowance was abolished. Learn more about the change here.
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).
