Increasing your Benefits
You may choose to increase your pension benefits under the 1987 Scheme, particularly if you are unable to build up 30 years’ pensionable service before your intended retirement age. You are able to increase your benefits by purchasing Added Years, although you may already be making Additional Voluntary Contribution (AVC) to buy additional benefits for yourself and/or your spouse through Standard Life.
If you do not qualify for a maximum pension because you are unable to complete 30 years' pensionable service by your compulsory retirement age, you may be able to purchase extra service to increase your pension benefits on retirement. This will be more expensive than the normal contribution rate because the Police Force will NOT contribute. You will have to pay the full cost of the additional benefits.
Accrued service in the 1987 Scheme, plus increased benefits purchased within the scheme, cannot exceed 40/60ths i.e. 30 years. You cannot purchase added years to cover career breaks if, on your return, you are able to accrue 30 years’ service by age 55.
The purchase of ‘added years’ normally entails a long term commitment to pay contributions until you retire or leave the 1987 Scheme. Your contributions for increased benefits are calculated as a percentage of your pay and will increase every time as your pay increases. However, these contributions will attract tax-relief, as they will be deducted from your pay before the deduction of income tax.
The you elect to pay regular contributions at any time while there are at least 2 years between your next birthday and your compulsory retirement age.
If you retire before your planned date of retirement, or leave the 1987 Scheme, you will be credited with the 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, you will be credited with the total added years you originally elected to buy.
Additional Voluntary Contributions (AVC)
If you entered into the Additional Voluntary Contribution (AVC) arrangement on or before 30 September 2010, you will be fully aware of its benefits and your options when you retire. The contributions that you are making attract tax-relief, as they are deducted from your pay before the deduction of income tax.
You have a choice of investment funds available for the investment of your AVC Fund, which can be changed at any time. When you retire, you are able to use your AVC fund to:
- purchase an annuity with Standard Life, or with another provider on the open market;
- take up to 25% of the value of the fund as tax-free cash and purchase an annuity with the remainder.
If you die before retirement, your AVC cannot be used to provide a pension, but the AVC fund will be paid to the Police Force. At their discretion, the fund will then be paid to your surviving spouse or civil partner or, in the absence of such a person, to your Estate.
If you have elected to pay death benefit contributions to provide life cover above the level provided by the 1987 Scheme for death in service i.e. twice your pensionable pay, you will be aware that HM Revenue and Customs allow death benefit payments of up to 4 times final remuneration. This leaves scope for you to increase death benefits of up to 4 times annual gross earnings. You can stop paying your death benefit contributions at any time, in which case your cover will cease. As with any insurance, you will not receive a refund of the contributions already made.
Note that the AVC arrangement closed to new contributors from 1 October 2010. This means that even existing contributors will NOT be able to increase their contributions, nor will you be able to transfer any other AVC benefits into your existing AVC fund.
The AVC arrangement closed to new contributors from 1 October 2010. This means that even existing contributors will NOT be able to increase their contributions, nor will you be able to transfer any other AVC benefits into your existing AVC fund.
HM Revenue and Customs place overall limits on pension contributions which are tax-deductible, but these limits are quite generous. The current position is that, unless you are a very high earner, you are normally able to pay 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 pension entitlement has increased substantially i.e. if you have been promoted or have taken up a more senior appointment.
You are also able to take out an entirely separate personal pension plan at the same time as you contribute to the 1987 Scheme.
You are strongly recommended to seek Independent Financial Advice before taking any action.