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Original poster

Paying a lump sum into my pension

36 replies

Anono2022 · 01/02/2023 18:36

Hi I am looking for advice.

I am looking for pay around a £3000 lump sum into my Local Government Pension. But, it's really confusing me. So im asking in simple terms the easiest way to do this please?

Pension provider has been vague in all honesty and I cannot pay it in via my salary which I would have preferred. So it has to be a lump sum.

So, an amount is deducted from my salary for my PC every month. I am then taxed on the remainder. I've then saved a sum to top up my already deducted PC from my taxed pay. Basically I cannot increase the percentage I wish to pay in via my salary but in my previous job I paid in alot more into my pension than I do now, and I wanted to keep my contributions consistent. I didn't want to drop my PC after paying in a set amount for 8 years.

My last pension was one where I claimed tax relief. My new one isn't. However I understand with the lump sum I wish to pay in I will need to claim tax relief myself as I have already been taxed on the money. I've never had to do this as the previous provider did it automatically.

So is it easy enough to pay in a one off (possibly) yearly lump sum? And how do I claim the tax relief to go into my pension too?

Any advice is greatly appreciated. hope I've made sense

OP posts:
Original poster
Anono2022 · 01/02/2023 20:46

Hoping someone can offer some advice

OP posts:
holbolbol · 01/02/2023 20:52

I'm in the local government pension scheme. Can you not do shared voluntary contributions to increase the amount you pay in?

holbolbol · 01/02/2023 20:53

Additional Voluntary Contributions, sorry

Original poster
Anono2022 · 01/02/2023 20:54

I've been told no. Anything additional will be have to be paid via prudential (I think they said)

OP posts:
Oakbeam · 01/02/2023 21:01

Do you currently make voluntary contributions?

Original poster
Anono2022 · 01/02/2023 21:05

No because I haven't known how to.

My old pension was via Nest and I was easily able to specify the percentage I wanted to pay in. I have been told I cant do this through my employer. Anything additional over the percentage for my salary band cant be taken directly from my wages.

I was hoping it would be much easier than it seems to be. LGPS have been pretty vague and just sent me a link to information on their website. I'm giving it another read and I am possibly being silly but it doesn't seem as easy as my last employer

OP posts:
messybutfun · 01/02/2023 22:09

Local government are defined benefit pensions. It is not linked to your contributions.

MyMilkshakeScaresAllTheBoys · 01/02/2023 22:17

messybutfun · 01/02/2023 22:09

Local government are defined benefit pensions. It is not linked to your contributions.

That's not entirely true. It is defined but if it anything like the civil service one, you can pay extra into it and top it up. My boss is new and brought some old pensions together into it. He was really pleased he did. You have a year or two to do so, and there are calculators to see the projection to decide if it is worth it.

messybutfun · 01/02/2023 23:04

Transferring a legacy pension into your new scheme is not the scenario you have described.

You talked about additional contributions.

There is absolutely nothing to stop you from contributing to a personal pension (subject to limits) - tax relief is given automatically at source.

Original poster
Anono2022 · 02/02/2023 17:50

To be honest I would have liked to have transferred all my pensions into my one how but I only have two months to do so, so i probably haven't got enough time. I have a decent amount from my last one then little ones from jobs years ago.

Sorry if I've misread but are additional contributions not treated the same as contributions paid from salary? I thought it all went into one big pot to draw down at the end?

I really do need go get this £3000 paid in though so I will have to try and call them

OP posts:
helpfulperson · 02/02/2023 18:00

www.lgpsmember.org/your-pension/paying-in/paying-more/

This explains the options. Certainly additional voluntary contributions are paid into a prudential account.

ChessieFL · 02/02/2023 18:01

OK. There are two ways you can pay additional contributions in the LGPS.

The first is paying Additional Voluntary Contributions to a provider chosen by your LGPS fund (and it sounds like your fund uses Prudential). You can choose how much you pay and the contributions are deducted from your salary and paid over to Prudential. On retirement you can then choose how to use this fund - to take it as a lump sum, additional pension or a bit of both. The amount you can take from your AVC fund as a lump sum will depend on the overall value of your LGPS benefits including your AVC fund and how much lump sum you’re taking from your main scheme benefits.

The other choice is paying Additional Pension Contributions, which buys you additional annual pension in the main LGPS scheme. This also gets deducted from your salary but then gets paid into the LGPS fund. You can pay a lump sum or spread it over several months.

In both cases you get tax relief on your contributions.

I think the reason you’ve been told you can’t pay it from salary is possibly because your monthly salary isn’t big enough to make a £3k deduction as well as your usual contributions. Why not just spread the £3k over a few months via salary deduction? It won’t make much difference to the amount you eventually receive from the scheme and is much easier all round for everyone.

More info here
www.lgpsmember.org/your-pension/paying-in/paying-more/

ChessieFL · 02/02/2023 18:02

And if you have been told you can’t pay anything at all above your standard contributions from your salary that is simply wrong. You can.

Polkadotties · 02/02/2023 18:03

You can start an APC contract where you have additional contributions taken each month, these will provide a set amount of additional CARE pension

Original poster
Anono2022 · 02/02/2023 21:20

Thank you for this information. I've been told exactly that, that I cannot make additional contributions via my salary by our payroll and LGPS.

I was too late to call this evening so I popped them a message. Hopefully I get a reply soon.

Between the two, is there a better way to make additional contributions?

OP posts:
ChessieFL · 03/02/2023 06:18

There’s different advantages to each so it really depends what you’re looking to get from it.

AVCs (to Prudential) are very flexible so you can vary the amount you’re paying in frequently if you want to, and there’s a lot of flexibility to decide how to take the AVC fund in retirement. The flip side is that you can’t be sure what you will get from it as it will depend how the investments perform (you will be able to choose the type of fund(s) it gets invested in so you can choose something with higher or lower risk).

APCs are less flexible - once you’ve started a contract you can’t vary the amount you’re paying. You can stop the contract and be credited with the proportion of additional pension you have paid for, but you can’t change it. The benefits you get are less flexible too - it buys you additional pension and you can give up some of that to get some more lump sum but that’s all. Buying additional pension is also expensive so you may not get much for your £3k. However the benefit of this method is that you know exactly how much pension you’ll be getting at the end of it (as long as the full contract is paid up).

TheClitterati · 03/02/2023 06:36

I can make additional payments into my pension. They then claim the tax back and it gets directly added.

So if I pay in £100 they claim about £20 tax back from the govt & it's added to pot too.

nannynick · 03/02/2023 06:42

Is your salary quite low? I am wondering if the issue may be that having money go in via salary sacrifice (if they are doing that, unclear if that is the case or not) then paying in a large amount is taking pay under National Minimum Wage.

You may be able to drip the money in over a period of time.

You may be able to buy an additional year of pension. This is called APC - additional pension contributions and it can be paid as a lump sum. It is dependent on which pension scheme you are in,
There is an Extra Pension Calculator on the LGPS member website.

LGPS is not one pension fund. It is I think 86 different pension funds which come under the same banner. So whilst the LGPS member website is useful, you need to refer to the specific pension fund for technical queries. The LGPS website has contact details for each fund.

You have the Nest pension still, so if paying more to the LGPS is not possible at the moment, you could pay into that instead, assuming you are well within your pension annual allowance.

CatOnTheChair · 03/02/2023 06:52

Could you put it into the old Nest scheme?

Oakbeam · 03/02/2023 08:54

You may be able to drip the money in over a period of time.

That is what I did. Six months. Not ideal but it was the only way I could find of getting a sizeable lump sum in and get the tax relief.

Original poster
Anono2022 · 03/02/2023 13:45

Oh I didn't realise I can still pay into my Nest? I may just do that then. Sounds the easier way

OP posts:
Polkadotties · 03/02/2023 14:55

Anono2022 · 03/02/2023 13:45

Oh I didn't realise I can still pay into my Nest? I may just do that then. Sounds the easier way

Why would you chose to pay into a pension scheme where you can lose money compared to a guaranteed pension?

Original poster
Anono2022 · 03/02/2023 16:16

Sorry this is where I realise I am very naive on this subject.

So with Nest I could lose money? But I'm sure I've read on the LGPS I can too?

OP posts:
Original poster
Anono2022 · 03/02/2023 16:21

So I appreciate I am going to sound really stupid but ive used the calculator and a lump sum of £3000 will only buy me an additional £339.85.

How?

OP posts:
Oakbeam · 03/02/2023 17:23

Only?