Buying Extra Pension – Terms and Conditions

General

Whilst you are an active member of the LGPS (NI) you can choose to buy extra pension by spreading payment of the Additional Pension Contributions (APCs) over a number of complete years or by making a one-off lump sum payment. However, if you are a year or less from your Normal Pension Age (NPA), you are over NPA or NILGOSC takes the view that spreading payments would be impracticable you can only pay by means of lump sum.

If you choose to spread the payments, the additional contributions would be deducted from your pay each pay period and attract automatic tax relief. If you choose to make payment by a one-off lump sum this would normally be deducted from your pay (with automatic tax relief). However, you have the option to make a lump sum payment direct to NILGOSC but you would then be responsible for claiming any tax relief on the payment direct from HM Revenue and Customs via your self-assessment tax return. Please note, tax relief will only be given on contributions up to 100% of your UK taxable earnings or, if greater, £3,600 to a tax relief at source arrangement, such as an additional pension contribution arrangement.

If you choose to buy extra pension by making a lump sum payment, you will be credited with the full amount of extra pension bought.

If you choose to spread payment of the additional pension contributions over a number of complete years you will be credited with the full amount of extra pension bought if you complete the payments or if, before completing payments, you are retired on the grounds of ill-health with an enhanced pension. In all other cases, if you cease payments early (either because you choose to cease making the payments or because you cease membership of the Scheme) you will be credited with the amount of extra pension you had bought at that time.

Your employer can choose to contribute to the amount of extra pension to be purchased. This is an employer discretion and you can ask your employer what their policy is on this. NILGOSC will require a Good Health medical at your cost, before your application is accepted.

Any extra pension bought increases the pension payable to you when you draw your pension. If you draw your pension before your Normal Pension Age (NPA) under the Scheme the extra pension that has been bought will, unless retirement is on the grounds of ill-health, be subject to a reduction (because you are drawing it early) and if you draw your pension after your NPA it will be subject to an increase (because you are drawing it late).

In the event of your death, no extra pension benefits will be payable to your dependants in respect of the extra pension bought (as the APCs buy extra pension for you only).

The Process

When making an application you must specify the amount you wish to pay or the amount of pension you wish to buy and, if payments are to be made by regular contributions, the period over which the contributions are to be paid (but the end date for regular contributions can be no later than your NPA under the Scheme).

If you have more than one active pension account in the Scheme (i.e. because you are in the Scheme in more than one job) you must specify which job the extra pension is to be credited to. If you wish to pay additional pension contributions for each job, you will have to submit separate additional pension contribution applications for each job.

After getting the additional pension contributions quote from this website you should, using the application form provided on this website, submit the signed, completed application to NILGOSC along with payment for your Good Health medical.

If your employer has agreed to meet part of the cost of buying the extra pension you must obtain their agreement in writing showing the amount of extra pension to be bought and the share of the cost that they will meet. This must accompany your application to pay additional pension contributions.

If you choose to pay by regular additional payments, or by a one-off lump sum deduction from your pay, your employer will not commence deductions of the additional pension contributions from your pay until notified by NILGOSC, following a satisfactory medical report.

If you choose to pay by a lump sum payment made directly to NILGOSC you should not submit the payment to us until we have confirmed that your application has been accepted and have provided you with details of how to make the payment. Where you are paying by lump sum payment, directly to NILGOSC, you should be aware that there are potential tax implications if you use a tax-free lump sum due from, or already received from, a pension scheme to pay for the APC. This activity is known as recycling and you can find more information at the HMRC website

www.hmrc.gov.uk/manuals/rpsmmanual/RPSM09208020.htm and www.hmrc.gov.uk/manuals/rpsmmanual/RPSM04104900.htm.

Please note that if there is a delay in a decision on whether your application can be accepted which is caused by you and you pass a birthday which results in the cost of purchasing extra pension to change, you will be asked to resubmit a new application.

The Agreement

By signing the application form to buy extra pension you agree to the amounts shown as payable by the employee to be deducted from your pay or invoiced to you depending on the method of payment chosen. If regular payments have been selected then your agreement to deduct the amount shown as payable by the employee continues for the period shown on the application form.

Should you fail to meet any of the payments due the agreement shall cease and the amount of pension purchased shall be adjusted to take account of the period over which payments have not been received.