Increasing your Benefits
You may choose to increase your pension benefits, particularly if you are unable to build up 35 years’ pensionable service before your intended retirement age. You have the option to purchase increased benefits in the 2006 Scheme through Added Years.
You are also free to take out an entirely separate personal pension plan at the same time as you contribute to the 2006 Scheme.
If you have less than 35 years’ pensionable service, you may be able to buy up to 5 years’ extra service to increase your 2006 Scheme benefits on retirement. However, this will be more expensive than the normal contribution rate. because the Police Force, which pays towards your basic Scheme benefits, will NOT contribute to the added years purchase. You will have to pay the full cost of the additional benefits.
The purchase of ‘added years’ normally entails a long term commitment to pay contributions until you retire or leave the Scheme. Your contributions for increased benefits will attract tax relief and are calculated as a percentage of your pay and will therefore increase every time your pay increases, as will the benefits provided by the purchase.
If you decide to purchase ‘added years’ within 12 months of joining or re-joining the force you have the choice of paying additional contributions by deduction from pay or by making a lump sum payment. If you pay by lump sum, you will only obtain tax relief up to the total of your taxable earnings in the tax year.
If you serve part-time you have a choice of purchasing ’added years’ on either a full-time basis or a part-time basis (which will cost less as a percentage of your pay, but will buy you less additional service).
If you retire before your planned date of retirement, or cease to serve with a deferred pension or with a transfer value, you will be credited with an appropriate proportion of the increased benefits that you were purchasing. If you die or retire on ill-health grounds and have bought or are buying added years by lump sum or periodical contributions, you will be credited with the total added years you elected to buy.
The 2006 Scheme does NOT have a linked AVC scheme.
HM Revenue and Customs places overall limits on pension contributions which are tax deductible, but these are quite generous. Unless you are a very high earner, you are normally able to pay up to the 100% of your taxable earnings in a tax year in pension contributions and gain tax relief, although there may be limitations in any year in which your benefit entitlement has increased substantially (for example, if you have been promoted or have taken up a more senior appointment).
You are strongly recommended to seek Independent Financial Advice before taking any action to purchase increased benefits.