clear

Buying additional pension

Additional pension contributions (APCs) were introduced in the new LGPS from April 2014 and replace the previous additional contributions known as additional regular contributions.

There are 2 types of APCs:

Both types of APCs use the same factors for calculating the cost and are payable in the same way.

If the employee wishes to go ahead with buying extra pension in either of the above circumstances, they will need to sign a contract to do so and Peninsula Pensions (the pension fund administering authority) must be notified of:

  • the amount to be purchased
  • the method of payment
  • the cash contribution
  • the period over which it is to be paid if applicable
  • the reason for the purchase
  • the account to which the APC contract is to be attached (if the member has more than one active pension account)

If the member wishes to pay an APC for more than one job they will need to submit an election form for each job.

APCs buy pension for an active member only, there are no dependents’ benefits included.

If the additional pension being purchased by APCs is £2,000 or more, we require the member to get a medical form completed by their GP (at the member’s own expense) before agreeing to an APC election and can refuse an APC contract application if they are not satisfied that the member is in reasonably good health.

At the end of each scheme year or at the date the APC contract is terminated if earlier, the member’s active pension account is to be credited with the amount of additional pension purchased that year.

If the contract is terminated early because the member is retired with a Tier 1 or Tier 2 ill-health pension, the remaining amount of additional pension is deemed to have been purchased and is credited to the member’s active account at the point of leaving.

Pension purchased in this way will be reduced or enhanced if taken before or after the individual’s normal pension age (NPA) under the 2014 Scheme (except in cases where enhanced ill-health benefits are awarded). Members can choose to cease paying an APC at any time.

The member’s total pension account, including any additional pension, bought and credited to their active account, shall be revalued at the end of each scheme year in line with the relevant HM Treasury Order for that year (but subject to an adjustment in the year the member ceases to be an active member to ensure no double indexation).

  • Buying the additional pension

    An employee can purchase any amount of additional pension up to a maximum amount each year which is increased each April by Pensions Increase Orders and the online calculator confirms the current years maximum. 

    To buy extra pension the employee may choose to make a one-off contribution or regular additional contributions, to buy a set amount of additional pension. The cost (a cash amount not a percentage of pay) is determined by the employee’s age and the amount they wish to purchase.

    If the member has more than one employment, then they must decide which employment the APC is payable on. An employee cannot commence or continue buying an APC in this circumstance if they are in the 50/50 section.

    An employer is required to have a discretions policy on whether they agree to pay all or part of a member’s APC.

  • Calculation

    A member can use the online calculator to find out the cost for purchasing additional pension.

    However, some members may prefer to contact Peninsula Pensions direct to discuss their options.

    After getting the quote, the member should apply to Peninsula Pensions, using the form provided on the national website or from us.

    If you receive an election form please do not action but instead await instruction from us.

  • What we do when we receive an election form

    When we receive a signed election form from a member we:

    1. Check that the information on the form is correct.
    2. If not correct, we proceed as per the details provided in the ‘Regular contributions’ and ‘Lump sum’ sections below.
    3. Once the form has been validated we will send details to the employer so they can commence deductions and will also send a confirmation letter to the member.

    If you as an employer receive an APC application form, please do not start making deductions, but instead, forward the form to us. We will be in touch to let you know what you need to do next.

  • Regular Contributions

    Regular contribution payments for APCs should begin at the start of the next available pay period after the election unless:

    a) We need a medical to be submitted before we accept any application (if the contract is for buying £2,000 or more additional pension). Please note that this requirement is under review and will be confirmed shortly.
    Action: We will ask for the required medical form from the member and deduction instructions will be sent to you once the application has been cleared.

    or

    b) The member’s pay history suggests that the amount to be paid each pay period cannot be reasonably deducted from the member’s pay.
    Action: Please notify us – providing details of the member’s pay history – and let the member know that the application has been referred to us for clearance of the amount to be deducted from pay.

    Please wait for us to let the member know our decision before starting to make any deductions.

    If the decision is to reject the application, we will notify both the member and employer of our decision together with the reasons, within a reasonable period of time. However, if any decision is delayed due to action or inaction by the member and the member passes a birthday which causes the costs of the purchase to change, the member must submit a new application.

    or

    c) The member has elected to pay into the 50/50 section and is paying reduced contributions.
    Action: We aim – within a reasonable period of time – to inform the member that the application has been rejected and provide the reasons for that rejection.

    or

    d) The amount of pension to be purchased and/or the share of contribution to be met by the employer are not the same as that in the written agreement from the employer.
    Action: We aim – within a reasonable period of time – to inform both the member and the employer that the application has been rejected, provide the reasons for that rejection and inform the member that they should submit a new application based on the correct information.

    Once the application has been accepted by both Peninsula Pensions and the employer, please confirm the deductions to us by completing the required form.

    If the member is paying the cost of buying additional pension as a regular deduction, it must be paid over a minimum of one year or multiples of years. It is not possible to spread the cost over a period of months.

    The employee chooses when they stop (after 1 year, 2 years, 3 years, for example), but they must stop before their NPA. Those members who are a year or less from their NPA, or those members over their NPA but under age
    75, may only pay by means of a lump sum.

    If the member’s pay is reduced or they are on no pay, please see the section ‘APC payments during absences’ later in this guide.

    Please pay any employees’ regular APCs, together with your contributions to APCs, to us within the statutory deadlines (or such earlier deadlines as we may specify).

  • Lump Sums

    If the member has chosen to pay by lump sum they must also state on the application if they wish the payment to be made directly to us or through a deduction from the next available pay period.

    If by direct lump sum we aim to inform the member either that the application has been accepted and request payment or is subject to a medical check and we will ask for the required medical report from the member.
    Action: We must inform the member of our decision within a reasonable period from having received the required medical report.

    If the application is accepted, we should request payment and inform the member to claim any tax relief that might be due on the payment directly from HMRC, through a self assessment tax return.

    Please note that tax relief will only be given on contributions up to 100% of a member’s UK taxable earnings (or, if greater, £3,600 to a ‘tax relief at source’ arrangement).

    If the application is rejected, we should provide the reasons for that rejection. However, if any decision is delayed due to action or inaction by the member and the member passes a birthday which causes the costs of the purchase to change, the member must submit a new application

    or

    The amount of pension to be purchased and/or the share of contribution to be met by the employer are not the same as that in the written agreement from the employer.
    Action: We should, within a reasonable period of time, inform the member and the employer that the application has been rejected, provide the reasons for that rejection and inform the member that they must submit a new application based on the correct information.

    If the lump sum is to be paid by deduction from pay, we will inform the employer of the amount to be deducted from the next available pay period and let the member have confirmation that the application has been
    accepted unless:

    a) We require a medical to be submitted prior to the acceptance of any application if the contract is for buying £2,000 or more additional pension.
    Action: We will request the required medical report from the member and the employer should wait for us to clear the application before making any deduction.

    or

    b) You, as the employer considers the member’s pay history to be such that the lump sum amount cannot be reasonably deducted from the member’s next pay period.
    Action: You as the employer should notify the administering authority together with details of the member’s pay history and notify the member that the application has been referred to the administering authority for clearance of the amount to be deducted from pay. The employer should wait for the administering authority to notify them of its decision before making any deduction.

    If the decision is to reject the application, we must notify both the member and employer of their decision, together with the reasons, within a reasonable period of time. However, if any decision is delayed due to action or inaction by the member and the member passes a birthday which causes the costs of the purchase to change, the member must submit a new application.

    or

    c) The amount of pension to be purchased and/or the share of contribution to be met by the employer is not the same as that in the written agreement from the employer.
    Action: We should, within a reasonable period of time, inform both the member and you, as the employer, that the application has been rejected, provide the reasons for that rejection and inform the member that they should submit a new application based on the correct information.

    Any lump sum deducted from the employee’s pay together with the employer share of any shared cost lump sum APC must be paid over to Peninsula Pensions by the employer within the statutory deadline (or such earlier deadline as we may specify).

  • Employer only or shared cost APC

    Employers can award any amount of additional pension up to a maximum amount each year (less any amount of additional annual pension the employer or employee has already contributed towards or is contributing towards under a shared cost APC – SCAPC or ARC/SCARC). The maximum amount is increased each April by Pensions Increase Orders and the online calculator confirms the current years maximum.

    Such an award may now also be made within six months of leaving to those people who have left on the grounds of redundancy or business efficiency under Regulation 31, but the pension is payable to the member unreduced and the resultant strain is payable by the employer in addition to the cost of the SCAPC.

    A SCAPC paid by an employer under Regulation 16 for a member who is still active is reduced on any early retirement (except on enhanced ill-health
    retirement) so incurs no additional strain cost on redundancy or efficiency retirement.

    If you, as the employer, are meeting the full cost of the additional pension to be purchased, you can obtain a quote from the national website or from us of the lump sum cost for that member.

    The member should then submit the application to us together with written confirmation of the agreement to purchase that amount of additional pension.

    We should inform the employer and the member that the application has been accepted and request payment from the employer.

    Where the extra pension is bought in full by the employer, there is no requirement for the member to undertake a medical check even where we have such a policy in place.

    You, as the employer, would make a one-off contribution to buy a set amount of additional pension for the member. The cost is determined by the employee’s age and the amount purchased.

    You, as the employer, must have a discretions policy on whether you agree to buy an additional pension for a member through APC in full or part.

  • APC payments during absences

    If the member elects to pay an APC by regular deductions and subsequently has a period of:

    • sickness or injury on reduced contractual pay or no pay
    • child-related leave (ordinary maternity, adoption or paternity leave, plus paid additional maternity, paternity or adoption leave, plus unpaid additional maternity, paternity or adoption leave)
    • absence due to a trade dispute
    • reserve forces service leave
    • any other period of authorised leave of absence (including additional leave purchased by salary sacrifice)

    Any pre-existing APC/SCAPC contracts remain payable (unless the member elects to end the contract) with the exception that during a period of sickness or injury on no pay, the employee contributions to an APC/SCAPC are deemed to have been paid but the employer must continue to pay the employer contributions to a SCAPC.

    It should be noted, however, that a member electing for 50/50 cannot continue to pay into or take out an APC arrangement or a shared cost APC arrangement (unless it is to purchase an amount of pension lost due to a trade dispute or unpaid authorised leave of absence, including a period of unpaid additional maternity, paternity or adoption leave).

    If the employee isn’t receiving any pay, the employer contributions to a SCAPC remain payable but the employee payments due to an APC or SCAPC which could not be collected rollover as a debt to be recovered from pay upon return to work.

    Any employee APCs actually collected (but not those deemed to have been paid) must be added into the employee APC cumulative and any employer contributions to a SCAPC must be added into the employer SCAPC cumulative.

    Any pre-existing APC/SCAPC contracts remain payable during any period of absence due to a trade dispute.

    Although the employee is in receipt of no pay for the period of the industrial action, the employer contributions to a SCAPC remain payable.

    The employee payments that were due to an APC or SCAPC should be deducted if there is enough pay in the period from which to deduct the payment. Otherwise, the employee payment that was due will rollover as a debt to be recovered from pay upon return to work.

    Any pre-existing APC/SCAPC contracts remain payable during any other period of authorised leave of absence (including unpaid additional maternity, paternity or adoption leave).

    Although the employee is in receipt of no pay, the employer contributions to a SCAPC remain payable but the employee payments that were due to an APC or SCAPC which could not be collected rollover as a debt to be recovered from pay upon return to work.

  • Leaving early

    Leaving early

    If an employee leaves employment before they have finished paying for their APC then a pro rata calculation is made to work out how much of the original pension contract has been bought.

    If the employee is retiring on Tier 1 or Tier 2 ill-health grounds, then all contributions will be deemed to have been paid and full pension being bought will be added to their pension account.

    It is not possible for an employee to pay the unpaid additional contributions on leaving early.

    Please note that if the member retires early due to redundancy, efficiency or early voluntary retirement any additional pension being purchased by the member will be reduced (even though their normal benefits may be paid in full because of protection).

Supported by


Top