Local government pension

Matt_22

Do you also get tax relief on your pay due to your local government pension scheme contributions?

Dazed_and_C0nfused

Matt_22 said:

Do you also get tax relief on your pay due to your local government pension scheme contributions?

Yes, but in a different way to a lot of pension contributions.

LGPS operate the net pay method so say you earn £30k and pay 10% in LGPS contributions your taxable income (as shown on your P60) would only be £27k and you have avoided paying tax on the £3k.

For very low earners this isn't great as there is no tax to be avoided but HMRC are introducing a new system where they will make payments to people who pay net pay contributions and have total income under their Personal Allowance.

Matt_22

So you can benefit from the local government pension scheme straight away.

Dazed_and_C0nfused

Matt_22 said:

So you can benefit from the local government pension scheme straight away.

If you earn enough to be paying tax yes, you will be saving tax as well as accruing a pretty generous pension.

Matt_22

Thanks yes I seem to have paid less tax

Matt_22

Would it be a noticeable decrease in tax payment?

Dazed_and_C0nfused

Matt_22 said:

Would it be a noticeable decrease in tax payment?

Yes.

In the previous example of £30k salary the tax would normally be £290/month. 

With 10% net pay pension contributions the taxable income would only be £27k and the tax £240/month.

Matt_22

So £600 a year more in your pocket?

Matt_22

By having a job with the local government pension?

Dazed_and_C0nfused

Matt_22 said:

So £600 a year more in your pocket?

By having a job with the local government pension?

Well it depends on what you're comparing against but if two people were working for the same LGPS employer, both earning £30k and one was in the pension and the other wasn't then the one in the pension scheme would pay £600 less tax.

And, depending on how long they worked there, would be highly likely to have much better pension provision when they reached retirement age