Paying a lump sum into my pension

[Anono2022]

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

That’s an additional £339 every year you take the pension, so it could be for 30 years. 30x339=£10,179. Pretty good deal.

So at a very basic level (and ignoring inflation), if you live for 8.8 years beyond retirement age you’ve made your money back. And probably actually lower as your £3k if paid gross won’t have cost you that. If you live for a long time you benefit from indexed linked increases for many years

where it gets more complicated is the opportunity cost of not investing the £3k and the flexibility you lose by putting it in a DB scheme.

Eg if you were 40 you might have 28 plus years of investment growth at 4% above inflation your pot could be £9k which might get you 22.5 years at £399. Could be higher, could be lower but that is a variable you can’t control. Investing in a DC pot would give more flexibility to use it how you want, take a lump sum and an ability to access it earlier without reduction.

The decision on what is best will be very personal.

It‘s a guaranteed index linked return of over 10% per year.
In the distant future.
And if all your income is over the allowance you will be taxed on it as well.

LGPS pensioner here - I started paying AVCs about 15 years before I retired and gradually increased contributions during those years. This reduced my tax (in fact I worked it so I avoided 40% rate completely) and built a considerable sum, which I took as a lump on retirement. In the last couple of years I substantially increased the amount to really boost the investment. With hindsight, it was a very shrew move and it made a good supplement to my defined benefit pension.

I think the other way of increasing pension is to buy additional years into LGPS. I did have quotes for that but it was very expensive for me (possibly as it was towards the end of my career).

Anyway, there are certainly ways to do it. Prudential is one of the providers that LAs use for AVCs.

There is a contributor of Money Saving Expert forums (Silvertabby) who used to work as a pensions administrator in a Local Authority. She is very knowledgeable for anyone who needs a bit of help with LGPS.

You can’t buy added years. I work for a LGPS fund.

I'm sorry to ask but is there a better way to contribute? I'm obviously looking for the option that will benefit me best when I come to take my pension.

My circs are I started working in a school nearly a year ago. In November I discovered Unions had done a pay deal and we received backpay. This is where a chunk of the contribution will come from. But as previously stated I used to pay more into my pension, around 15% of my salary into my Nest. LGPS is only around 6 ish percent. So I've basically set aside the remainder from my taxed salary each month to do a bulk contribution each year.

I would have preferred to increase the percentage via my pay as it feels the easiest way BUT both my employer and our payroll said no and had to do this via LGPS. Who haven't been very helpful.

I've checked Nest and I could literally pay the amount straight over and it is that simple. Nothing like that on my pension portal for LGPS

On the LGPS member site is an APC calculator. Use this to work out whether you want to do a one off lump sum which you pay directly to the scheme or regular contributions through your payroll. Once you have decided what way you want to do, complete the form and send to your LGPS fund. They will update your record and if you have decided to do monthly payment send the contribution deduction instruction to your payroll team. Or, if you have chosen lump sum option they will send you the Funds bank details for you to make payment.

@Polkadotties can I do a bulk in this instance and then opt from my salary going forward?

Yes you can. You would need to do one application for the bulk and then another for the monthly

An alternative would be to set up a separate self invested pension (SIPP)- I have one with AJ Bell - v easy to set up on line. They will automatically refund your tax into your pension pot at the lower tax rate. For somelevelling up reason I don't understand this will be 25% rather than 20%. If you are a higher rate payer you will need to submit a tax return to claim back the remaining 20% which will be paid directly to you.
The benefit of the Sipp is you can take it from age 55 separate to your main work pension should the need arise - the first 25% will be tax free. You can also add to it at any time. Money in the Sipp is also ring fenced against inheritance tax if this applies to your estate.
You can keep your funds in cash in the Sipp or invest them where they will hopefully grow over the years eg in a low risk all world or all Europe shares tracker. You can easily monitor and control your investments on line.

It is 20% of the total amount which includes the 20%. It is the same as 25% of the net amount. Just to confuse everyone a bit more.