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    • Escapar2020
    • By Escapar2020 6th Sep 17, 8:45 PM
    • 33Posts
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    Escapar2020
    Pension input amount
    • #1
    • 6th Sep 17, 8:45 PM
    Pension input amount 6th Sep 17 at 8:45 PM
    I've never paid much attention to my local governmemt pension before, so please be gentle with me!

    I've had leter saying I exceeded my allowance last financial year, but not to worry because I can carry forward allowances from previous years. My question is about the pension input amounts, which seem to have varied significantly in recent years with no apparent pattern. Then, my pension input for 16/17 looks very large! So how is the pension input figure calculated each year? If it were based on my personal plus employer contributions, I'd expect to see increasing inputs each year, whereas they seem to have gone up and down randomly in the last few years!?

    Thanks in advance.
Page 1
    • AlanP
    • By AlanP 6th Sep 17, 9:06 PM
    • 956 Posts
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    AlanP
    • #2
    • 6th Sep 17, 9:06 PM
    • #2
    • 6th Sep 17, 9:06 PM
    Simple answer:

    ((16 * This Years Annual Pension Value) + This Years Lump Sum) - (((16 * Last Years Pension Value) + Last Years Lump Sum) * Inflation).

    So this years "overall pension value" minus "last years pension value" increased by inflation (September inflation rate I think, so 09/16 in this case.

    This year the inflation adjustment was 0%.

    NOTE: pension value includes AVC contributions not just the main LGPS benefits.

    Nigh on impossible to work out for yourself from from your Annual Benefit Statements that go from 01/04 to 31/03 each year as Annual Allowance calculation is based on 06/04 to 05/04 period so pension system makes the necessary adjustments so it is not based on exactly the statement pension values.

    For example if you had a pay rise on 01/04/17 that would not be reflected in Pension Statement but would be in the Annual Allowance calculation - particularly relevant if you have pre-2014 service linked to Final Salary.
    • Escapar2020
    • By Escapar2020 6th Sep 17, 9:55 PM
    • 33 Posts
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    Escapar2020
    • #3
    • 6th Sep 17, 9:55 PM
    • #3
    • 6th Sep 17, 9:55 PM
    Thanks for the info, still don't understand though! Regardless of the calculations, what is the defintion of ”input”? It sounds like the contributions made each year, or have I got that wrong? If I'm right, why would the input be £5k one year, and £70k the next year?
    • AlanP
    • By AlanP 6th Sep 17, 10:17 PM
    • 956 Posts
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    AlanP
    • #4
    • 6th Sep 17, 10:17 PM
    • #4
    • 6th Sep 17, 10:17 PM
    Thanks for the info, still don't understand though! Regardless of the calculations, what is the defintion of ”input”? It sounds like the contributions made each year, or have I got that wrong? If I'm right, why would the input be £5k one year, and £70k the next year?
    Originally posted by Escapar2020
    "Input" is the official name used across all pension schemes.

    If you were in a DC pension scheme, paying in 6% of your salary that was being matched by your employer the PIA would be 12% of your salary - nice and easy and equal to "the input".

    The calculation I outlined is how they try to "equalise" the value across different DB schemes, across tax years and relative to the simpler DC calculation.

    Assume that you and I earn the same salary for different local authorities had the same period of service and got the same 1% pay rise.

    I don't know the numbers but my employer might be paying 19% employer contributions into the local LGPS pot, yours might be paying 25% but our pension would have increased in value by the exact same amount.

    Using the 16* calculation our PIAs would be the same which makes sense even though "Output Amount" might be a better description for DB schemes.

    Annual Allowance is £40k per year but unused allowance from previous 3 pension input periods (years in simple terms but 2015/16 was a bit weird as HMRC allowed 2 periods for a particular technical reason) can be "carried forward" so allowing over £40k in a particular tax year.

    I hope your £5k and £70k examples are just that examples as if you were working for a local authority and your PIA went from £5k to £70k that implies one hell of a pay rise.
    • zagfles
    • By zagfles 6th Sep 17, 10:24 PM
    • 12,476 Posts
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    zagfles
    • #5
    • 6th Sep 17, 10:24 PM
    • #5
    • 6th Sep 17, 10:24 PM
    Thanks for the info, still don't understand though! Regardless of the calculations, what is the defintion of ”input”? It sounds like the contributions made each year, or have I got that wrong? If I'm right, why would the input be £5k one year, and £70k the next year?
    Originally posted by Escapar2020
    Have you got final salary benefits in the LGPS? Did you get a promotion or a significant payrise last year? Have you been in the scheme for a long time?
    • zagfles
    • By zagfles 6th Sep 17, 10:35 PM
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    zagfles
    • #6
    • 6th Sep 17, 10:35 PM
    • #6
    • 6th Sep 17, 10:35 PM
    I hope your £5k and £70k examples are just that examples as if you were working for a local authority and your PIA went from £5k to £70k that implies one hell of a pay rise.
    Originally posted by AlanP
    Could easily apply where someone has long service in a FS pension scheme and gets a payrise of maybe £8k or so.

    There's also the possibility of a screwup - OP have you increased your hours? My wife's in the LGPS and they invariably screw up when her hours change, probably the employer's fault rather than the LGPS, they see a salary change but don't get informed of the hours change and assume a higher FTE salary - which is what they use for the final salary benefits.
    • xylophone
    • By xylophone 6th Sep 17, 11:10 PM
    • 23,419 Posts
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    xylophone
    • #7
    • 6th Sep 17, 11:10 PM
    • #7
    • 6th Sep 17, 11:10 PM
    http://www.pruadviser.co.uk/content/knowledge/technical-centre/annual_allowance/
    • kidmugsy
    • By kidmugsy 7th Sep 17, 11:44 AM
    • 9,841 Posts
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    kidmugsy
    • #8
    • 7th Sep 17, 11:44 AM
    • #8
    • 7th Sep 17, 11:44 AM
    have I got that wrong?
    Originally posted by Escapar2020
    Yes, you're being too rational. In a sane world "input" would refer to money put in. For DB schemes some other word would be adopted to represent the answer to the calculation that AlanP described. But we are in Civil Service World, where nobody would dream of finding a word or phrase that would help the layman understand. After all, civil servants can always blame the politicians in the belief that the public are so gullible that they'll believe that politicians make the decisions on that level of detail.
    • Malthusian
    • By Malthusian 7th Sep 17, 12:24 PM
    • 3,289 Posts
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    Malthusian
    • #9
    • 7th Sep 17, 12:24 PM
    • #9
    • 7th Sep 17, 12:24 PM
    What actually are your pension input amounts for 16/17 and the previous three tax years?

    Do you have a personal pension / AVC / SIPP or any other pension schemes you have been paying into as well as the LGPS?
    • Escapar2020
    • By Escapar2020 8th Sep 17, 4:46 PM
    • 33 Posts
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    Escapar2020
    Thanks for all the responses!

    I'll try to answer the questions.

    Its a local government pension scheme, which I joined in 2001. It includes final salary pension to 2014.

    I did move up a couple of grades in november last year, salary £53k now.
    I don't have any other investments
    My input amounts have been...

    13/14 £39k
    14/15 £14k
    15/16 part 1 £4k
    15/16 part 2 £11k
    16/17 £70k

    So it all looks a bit random to me!
    • zagfles
    • By zagfles 8th Sep 17, 6:05 PM
    • 12,476 Posts
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    zagfles
    Thanks for all the responses!

    I'll try to answer the questions.

    Its a local government pension scheme, which I joined in 2001. It includes final salary pension to 2014.

    I did move up a couple of grades in november last year, salary £53k now.
    Originally posted by Escapar2020
    What was you salary before?
    I don't have any other investments
    My input amounts have been...

    13/14 £39k
    14/15 £14k
    15/16 part 1 £4k
    15/16 part 2 £11k
    16/17 £70k

    So it all looks a bit random to me!
    Right so you've easily got enough AA to carry forwards from previous years so you won't get taxed and you won't need to declare anything to HMRC. They might query it so make sure you keep the letter with the input amounts safe.

    But you might get a high PIA this years as well, most FS scheme use last 12 months' pay as the pensionable pay (not certain about the LGPS), which means your payrise will affect this year's PIA as well. It must have been a very large payrise!

    PIA from DB schemes can look random as they're based on increase in pension value, allowing for inflation. With FS benefits, a payrise gives a big increase in pension value. Plus the inflation figure used to revalue the pension is usually different from the inflation figure used by the PIA calculation (it's inflation over a different period) so this can make the PIA's jump up and down a bit.
    • Escapar2020
    • By Escapar2020 8th Sep 17, 6:55 PM
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    Escapar2020
    My previous salary was 45k, doesn't feel like a massive rise!
    • kidmugsy
    • By kidmugsy 8th Sep 17, 7:11 PM
    • 9,841 Posts
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    kidmugsy
    My previous salary was 45k, doesn't feel like a massive rise!
    Originally posted by Escapar2020
    Suppose a rise of £8k p.a. leads to a pension rise of £4k p.a. that will be paid for, say, 25 years. That's a £100,000 you'll have gained. Quite a tidy sum, eh?
    • zagfles
    • By zagfles 8th Sep 17, 7:16 PM
    • 12,476 Posts
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    zagfles
    My previous salary was 45k, doesn't feel like a massive rise!
    Originally posted by Escapar2020
    That doesn't sound enough to produce such a large PIA. Did you get another large payrise in the previous year?
    • Escapar2020
    • By Escapar2020 8th Sep 17, 7:39 PM
    • 33 Posts
    • 45 Thanks
    Escapar2020
    I dont plan to be in the job for 25 years!
    Most of the payrise is going to pay the mortgage early, hopefully 3-years time
    • Escapar2020
    • By Escapar2020 8th Sep 17, 7:40 PM
    • 33 Posts
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    Escapar2020
    Nope, no other large payrises!
    • zagfles
    • By zagfles 8th Sep 17, 9:05 PM
    • 12,476 Posts
    • 10,463 Thanks
    zagfles
    Nope, no other large payrises!
    Originally posted by Escapar2020
    I'd check the LGPS have your correct details then, because I can't see how the payrise you had could have caused such a large PIA. Around £40k perhaps, but not £70k.

    Do they have your correct hours? Did you do lots of overtime and has that been included in your FS pensionable salary? Did you have any previous LGPS service before 2001?
    • Escapar2020
    • By Escapar2020 8th Sep 17, 9:57 PM
    • 33 Posts
    • 45 Thanks
    Escapar2020
    I'd check the LGPS have your correct details then, because I can't see how the payrise you had could have caused such a large PIA. Around £40k perhaps, but not £70k.

    Do they have your correct hours? Did you do lots of overtime and has that been included in your FS pensionable salary? Did you have any previous LGPS service before 2001?
    Originally posted by zagfles

    I will be tlking to the scheme as I want to plan for early retirement (won't be giving up work, just this job!).


    I did plenty of overtime, but all unpaid!
    Mortgage Jan 2017: £45,460___Current mortgage (Oct 2017): £32,908
    Scheduled end: July 2028_______Planned MF day: Sept 2020
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