Accessing Local Government Pension but continuing to work

Happydude1

I am taking voluntary redundancy from my Local Government employer, but am also old enough to access my pension - so will be receiving redundancy and a lump sum based on pre-2014 service, and then a monthly pension.
However, being just over 60 I still feel I have more to give in a working capacity for a year or two, so I am looking at short-term contract work in local government via recruitment agencies, which then arrange payment via umbrella companies. Hence, apologies but I have a few considerations I would welcome advice on:-
- my redundancy payment will exceed the tax free allowance by around £7k, so I would be subject to 40% tax on that payment - is there a more tax efficient route to deal with the excess?
- Under LGPS rules if I was to work for another local government authority and my total income ie pension and contract work exceeds my previous salary I could forego my pension payment. Does working via an agency and umbrella company arrangement avoid the risk to my pension? I would of course still be paying income tax on all of the additional income I might earn.  

hyubh

Happydude1 said:

- Under LGPS rules if I was to work for another local government authority and my total income ie pension and contract work exceeds my previous salary I could forego my pension payment. Does working via an agency and umbrella company arrangement avoid the risk to my pension?

What you're referring to is called 'abatement'. This can only apply to final salary pension (i.e. not CARE pension), and is subject to the administering authority's discretionary policy. Some don't apply abatement at all, mainly because the admin is too much hassle for the supposed 'gain'. And even if the administering authority does impose abatement for old time's sake, you would need to be re-employed in a job that carries LGPS eligibility, which I doubt your scenario will involve.

That said - worth checking what the abatement approach is. Being LGPS, the discretions policy will be public information and likely freely available on the fund's website.

Silvertabby

Further to hyub's answer, it may be possible to pay your £7K 'excess' into your LGPS pension.  If your employer does allow this (these pesky employer discretions again) it can be a bit of a faff, so please start the ball rolling now before your LGPS start to calculate your redundancy pension benefits.  Start with your HR.