LGPS added years contract

Nual

Looking for some more advice please.

I am about to be made redundant and draw my LGPS. I haven't yet received any correspondence from the pension section but reading around it appears that as I am buying added years from pre 98 ( 1/80th) I should be given the option of buying the remainder of the added years contract. Is this correct?

I buy 92 days a year ( looking at previous pension statements) and am aged 60 so have 92 x 5 years left. This currently costs me 182.04/ month from gross salary. so would this be 10922.40 to finish the contract? I cant work out the tax implications of this.

Does anyone know if this sum can come out of redundancy payment or FPLS or AVCs?

If I am reading this right this would be a good deal as I would get almost 2k extra in FPLS and nearly 700 /year extra pension.

Many thanks

Nual

Bumping this as I know there are some LGPS experts on here!

xylophone

Bumping this as I know there are some LGPS experts on here!

PM to hyubh https://forums.moneysavingexpert.com/discussion/5435382

Drp8713

You do have the right to pay up the contract on redundancy:

http://www.lgpsregs.org/timelineregs/LGPS1995/19951019.htm#regC19

(5) Where -

(a) the relevant event is the member's ceasing to hold his employment,

(b)condition (a) or (b) in regulation D6(2) is satisfied,

(c) his employment ends not less than 12 months after the date of receipt of his notice of election, and

(d) he gives notice in writing for the purpose to the appropriate administering authority not later than the expiry of the period of three months beginning on the day after the last day of his employment,

then, if he pays to the appropriate pension fund, within the period of one month beginning on the date on which he is notified by that authority of the amount calculated by the fund's actuary to represent the capital value of the additional periodical payments remaining to be paid, a sum equal to that amount, he shall be treated as having completed payment in accordance with regulation C9(2) or, as the case may be, C15 and C16.

Nual

many thanks Drp and Xylophone

Nual

I contacted my pension section to request the amount required to complete the contract and was told in writing that this was not allowed, so many thanks again as I was able to send the link Drp gave and they apologised straight away.
I still don't have the figures but on my calculations buying the extra year and a bit will cost me 14735 for an extra 568 index linked pension and an increase of 1892 in the lump sum. So 8674 for 568. Is this a good deal?

xylophone

http://www.litrg.org.uk/tax-guides/employed/what-tax-do-i-pay-redundancy-payments

"You will be taxed on the redundancy payment in the tax year that you get it, even if you were made redundant in an earlier tax year."

https://www.aegon.co.uk/content/dam/ukpaw/documents/redundancy-payments-an-pension-contributions.pdf

"Does a redundancy payment count as relevant UK earnings?

Yes, but only the excess above the £30,000 tax-free element."

Presumably your Pension Scheme Administrators will advise on the amount you will need to complete the contract?

With regard to the 0% band and the Personal Savings Allowance see Post 7

https://forums.moneysavingexpert.com/discussion/comment/70470142#Comment_70470142

System

Hi

You have an automatic lump sum of 3/80ths with the option to increase the lump sum and reduce your pension pot.

So you can ask the question How much Lump Sum would/could be generated from the Added Years contract, although I suspect annual amounts are more important.

Well how many index linked years will you draw? I would GUESS after 14/15 years you will break even.

Nual

Still haven't had a figure from the pension section , but I think it will take about 9 years to break even, but I may be doing it wrong.

5 years left on contract so what I had been paying/ month x 60 = cost minus additional lump sum

Additional pension for the cost based on the amount I get for the years I
have already bought. And it is index linked as you say, and will increase survivor payout as well.

Nual

So I finally got the actuaries figure for how much it will cost to complete the contract. My sums were £9 out.

Now to work out if it is worth it.

They are quoting 10500 but I don't understand if I will get tax relief on this? Pension payments qualify for tax relief right? So 2100 less at 20%. I will get an additional lump sum of I think 1900. and an extra 570 pension/ year. so 11.5 years to break even.

Anyone know if I am right about the tax relief and if I would have to claim that back? And does this seem like a good deal?

Many thanks

xylophone

https://forums.moneysavingexpert.com/discussion/3089382

Post 4 seems relevant - you should check with your administrators?

This cannot be the first time this has happened so you would expect them to know, but given what you said in your previous posts, they do not seem quite au fait with the details?

It seems that you need to know whether you make the gross payment and reclaim from HMRC or whether you make a net payment, the scheme claims basic rate relief and you claim higher rate relief if you are a higher rate tax payer?

You will note that hyubh is an expert on LGPS and Drp8713 also seems very familiar with it - you might try a pm to one or other of them?

You are currently aged 60 so you have a fair chance of reaching your 80's in which case you get your payback.

And it would be a use for part of the sum that you do not seem to have any particular plans for?

https://forums.moneysavingexpert.com/discussion/comment/70698116#Comment_70698116

"Been trying to figure out what to do with it for months, but am paralysed. I have done most of the current accounts/ reg savers already, maxed the cash ISA for now and given a bit to family. maybe put it into an NS&I income bond at 1% for now. Then read up more on p2p. Pension is enough but I am hoping to downsize but to a more expensive area (upsize?) over the next year or so and I dont know what I will need for this."