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Local government pension

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  • Matt_22
    Matt_22 Posts: 297 Forumite
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    Do you also get tax relief on your pay due to your local government pension scheme contributions?
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 13,718 Forumite
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    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
    Matt_22 Posts: 297 Forumite
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    So you can benefit from the local government pension scheme straight away.
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 13,718 Forumite
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    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
    Matt_22 Posts: 297 Forumite
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    Thanks yes I seem to have paid less tax
  • Matt_22
    Matt_22 Posts: 297 Forumite
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    Would it be a noticeable decrease in tax payment?
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 13,718 Forumite
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    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
    Matt_22 Posts: 297 Forumite
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    So £600 a year more in your pocket?
  • Matt_22
    Matt_22 Posts: 297 Forumite
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    By having a job with the local government pension?
  • Dazed_and_C0nfused
    Dazed_and_C0nfused Posts: 13,718 Forumite
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    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
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