Added pension
What is added pension?
Added pension is just what it says! It is an amount of extra annual pension that you can buy; it will be paid with your classic, classic plus, nuvos or premium pension when you retire.
Who can buy it?
You can buy added pension if you are an active member of classic, classic plus, nuvos or premium. When you can start buying added pension depends on which scheme you are a member of, and your age.
- 30 July 2007 nuvos members.
- 1 October 2007 classic, classicplus, or premium members who have reached their 60th birthday on or before 1 October 2007.
- The date of your birthday if you are in classic, classicplus, or premium and reach 60 between 1 October 2007 and 1 March 2008.
- 1 March 2008 all other classic, classic plus, or premium members.
You cannot buy added pension after you have left the scheme.
Are there any limits?
Yes. You cannot buy more than £5,000 of added pension in total in the scheme year 2007-8 if you are in classic plus, nuvos or premium. As classic has an automatic lump sum it has an added pension limit of £4,000. This limit will go up each year in line with inflation; your pensions administrator can tell you the current limit. Note also that the tax rules mean that you cannot use a lump sum from another pension arrangement to buy added pension.
Can I buy added pension for my dependants?
If you are a member of classic, classic plus or premium, the added pension that you buy will include pensions for your dependants when you die. If you are in nuvos, you can choose to buy added pension either just for yourself, or for yourself and your dependants. You can find out who can receive a dependant's pension in the What happens when I die? section. You cannot choose to buy added pension only for your dependants.
How much does it cost?
The cost of added pension will depend on your age and gets more expensive as you get older. The cost will be reviewed in future, generally every three or four years, and may go up.
Please see our calculators which illustrate how much added pension you can buy with either a lump sum or regular monthly payments over a set period of time. They also estimates how much you might need to pay if you want to increase your pension by a set amount, e.g. £500 a year - again, either as a one-off lump sum payment or by monthly contributions. Added pension gives you the flexibility to decide what you can afford.
The calculators use Microsoft Excel. If you do not have access to Microsoft Excel, you can ask your pensions administrator helpline to tell you how much it will cost.
Do I get tax relief on my contributions?
Yes, provided that your contributions do not exceed the limits set by HM Revenue and Customs. In general, you can get tax relief on pension contributions of up to 100% of your taxable earnings, or £3,600 if you earn less than that. Tax relief is normally provided through the payroll, so you don't need to claim it back from the taxman.
What do I get for my money?
You will get a set amount added to your classic, classic plus, nuvos or premium pension that will increase each year in line with the Retail Price Index (RPI) each April.
How much you get will not depend on investment returns, so it is less risky than other ways of increasing your pension. When you draw your pension your added pension will be combined with your classic, classic plus, nuvos or premium pension. The age retirement section tells you more about the choices you can make when you draw your pension and the other benefits it provides: these will apply also to your added pension.
How do I pay for added pension?
You can choose to pay by regular deduction from your salary, or by lump sum. If you choose to pay by regular deduction, you can either choose a set amount (e.g. £20 each month) or a set percentage of your salary (e.g. 5% each month).
You should note that if you decide to pay a set amount, it will buy a smaller amount of added pension in future years because the rates are age based. If you want to go on buying the same amount of pension each year, you will need to increase your contribution amount each year.
If you pay a percentage of your salary this will increase the amount paid each year as your pay increases, but it may still not buy the same amount of pension.
If you choose to pay by regular deduction from salary, you must do so for the full scheme year, starting on 1 April, except in the year you start work and the year you leave. You can choose to make an open-ended commitment to go on contributing every month, until you leave or choose to cancel it.
Alternatively, you may pay by lump sum, but not in the first 12 months after joining. You can make one lump sum payment each year.
How will I know how much added pension I have bought?
Your annual benefit statement will show how much pension you have bought each year, and the current value of any added pension bought in previous years.
How do I apply?
- Contact your pensions administrator, contact details in our helpline area. They will tell you what you need to do to buy added pension. You can pay by lump sum at any time of the year after your first 12 months. If you want to start paying by monthly deductions from your pay, you should apply in time to start payments at the start of the scheme year (1 April).
