Buying back lost pensions
This page explains how you may buy back lost pension. This is done through an Additional Pension Contribution Contract (APC).
Additional Pension Contributions
Whilst you have been on unpaid maternity/paternity/adoption/bereavement leave or authorized unpaid leave you have not been accruing benefits in the pension scheme and as a result the amount in your pension pot will be affected. In addition, if you have protections as a result of being a member of the previous final salary pension scheme, your final salary membership will be reduced as a result of the break. This might only affect you if you were 55 or over on 1 April 2012.
You now have the option to pay Additional Pension Contributions (APCs) to cover any 'lost' pension. When you return to work your employer should advise you of the amount of pension you have 'lost' whilst on your unpaid maternity/paternity/adoption/bereavement leave or any other relevant unpaid leave, they should also provide you with the relevant form to complete in order to buy back the lost pension.
The website has a link to the self-service modeler that will enable you to determine the cost of the APC. If you elect to buy back all of your lost pension within 30 days of returning to work or the deadline specified by your employer which may be longer than 30 days of your return to work then the cost of the contract will be split, with your employer paying 2/3rds leaving 1/3rd for you to pay. However if your election is received after 30 days of returning to work, or the deadline specified by your employer which may be longer than 30 days of your return to work, or if you elect to purchase some, but not all, of the lost pension you must fund 100% of the APC
contract yourself.
You may purchase up to £7,194 (pa) additional pension, this amount is indexed linked and will increase each year.
How should I pay for my lost pension?
You may buy back your lost pension through monthly contributions providing that the contributions are more than £10 over a 12 month period. If the cost of buying back your pension is less than this you must make the payment as a lump sum. The lump sum payment can either be taken from your pay or paid direct to the Local Pensions Partnership. If you wish to use this option please contact us to ensure that the payment is paid to the correct payee.
All APC contributions made as a deduction from your salary will receive tax relief on the contributions. If you make a lump sum cheque payment you will need to contact HMRC in order to obtain the tax relief.
Election to only pay part of lost pension
If you choose to purchase only part of the lost pension it will be deemed as buying extra pension rather than buying back lost pension. This has the following consequences:
- When calculating rule of 85, the underpin or final pay for pre 14 benefits, a service break will
be deemed to have occurred; and - A member in the 50/50 section can not take out the contract.
- The employer would not be required to share the cost.
Example, if you are in the main section and you are off on unpaid additional maternity leave and, as a consequence, you will lose pension of £500. You may choose to buy back only £300.
As a consequence, when calculating the rule of 85, underpin, and final pay for pre 14 benefits, a service break will be deemed to have occurred for the period of unpaid additional maternity leave and the employer will not be obliged to fund 2/3rds of the cost.
Alternatively, if you had elected to purchase £500, no service break will be deemed to have occurred for the reasons given above and your employer will be obliged to fund 2/3rds of the cost (assuming the election was made within the time limits).
Retirement and APCs
APCs can be commuted in the same way as your main scheme LGPS benefits lost pension awarded will not be included in the calculation of any future survivor pensions.
APC's are designed to be paid out at your Normal Retirement Age therefore if they are paid before this date the income will be actuarially reduced – even if the rest of your benefits are paid unreduced. Alternatively, if the additional pension is paid after your Normal Pension Age, the income will be actuarially increased.
If you take early retirement and your APC contract has not been completed, the prorated amount of pension purchased to your date of retirement will be credited to your pension pot.
If you leave with an ill-health retirement and your benefits are paid out before your Normal Pension Age your additional pension will not be actuarially reduced.
| Tier 1 and 2 ill health | Tier 3 ill health |
| The APC Contract will be treated as though it is complete. |
The APC contract will be prorated inline with GAD guidance and added to the active pension pot. |
| The additional pension is paid without actuarial reductions. |
The additional pension is paid without actuarial reductions |
