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March 22, 2008
PENSIONS: LAST CHANCE TO START BUYING ADDED YEARS
19 March 2008
To: All Napo Members
Dear Colleague
PRIORITY ALERT
YOUR LAST CHANCE TO START BUYING ADDED YEARS IN THE LGPS
If you want to start buying added years in the LGPS you only have until 31 March 2008 to make an election to pay extra contributions to buy them. The option to buy added years ends when the new scheme comes into force on 1 April 2008. It will be replaced by an option for members to pay extra contributions to buy additional pension instead of added years.
Employers should have made members aware of the change but this notice is a final reminder that if you want to buy added years you must make an election right now and definitely before 31 March 2008: the election must be made in writing to your pension fund administrator. You should not wait for a quote unless it can be sent within a few days. Simply requesting a quote will not be sufficient to meet the deadline of end of this month.
Until 31 March members can elect to buy up to 62/3 added years if they are under age 64.
The benefits will be an extra 1/80 pension and 3/80 lump sum on the same basis as benefits under the current scheme based on final salary and inflation-proofed. Added years are credited in full if you retire on health grounds.
The cost depends on the age that the member starts to buy added years (the older you start the higher the % contribution needed) and contributions continue until age 65. You can stop paying added years, the added years being based on what you have bought up to the date you stop; you would also stop paying if you leave.
A couple of examples:
• A man starting at age 45 would pay 0.95% of his pensionable pay to get one added year. If his pensionable pay was £25,000 a year, the tax-free contribution on that rate of pensionable pay would be £237.50 per year.
• A woman starting at age 50 would pay 1.4% of her pensionable pay to get one added year. If her pensionable pay was £30,000 a year the tax free contribution would be £420 per year.
As it is a percentage, the contribution to buy added years will go up as your pensionable pay goes up, but the % of pensionable pay will not.
The option will be replaced from 1 April by the option to buy up to £5000 extra pension a year, in multiples of £250 a year. This is more flexible but is likely to cost more because the cost of pensions has increased recently. Also the Government is saying that the contribution made will be reviewed periodically and changed if the cost of the pension changes.
Yours sincerely
PETE BOWYER
Research and Information Officer
Posted by Hampshire at March 22, 2008 02:26 PM