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CONTRIBUTE TO A PERSONAL PENSION PLAN OR STAKEHOLDER PENSION AS A COUNCILLOR MEMBER
You may be able to make your own arrangements to pay into a personal pension plan or stakeholder pension scheme at the same time as paying into the LGPS. With these arrangements, you choose a provider, usually an insurance company. You may want to consider their charges, alternative investments and past performance when you do this.
You choose how much to pay into the arrangement. You can pay up to 100% of your total taxable earnings in any one tax year (or £3600 if greater) into any number of concurrent pension arrangements of your choice and be eligible for tax relief on those contributions.
If you pay into a personal pension plan or stakeholder pension scheme, the contributions you make to it are invested in funds managed by an insurance company. You have your own personal account that, over time, builds up with your contributions and the returns on your investment, and will be available later in your life to convert into additional benefits. You can often choose which investment route you prefer.
When the benefits are paid, you will be able to take up to 25% of your Fund as a tax-free lump sum, provided the lump sum does not exceed 25% of the Lifetime Allowance less the value of any other pension rights you have in payment, with the remainder available to buy you an annuity from an insurance company, bank or building society (but you can defer purchasing an annuity until the day before your 75th birthday at the latest).
The amount of annuity depends on several factors, such as interest rates and your age. You also have some choice over the type of annuity, for example whether you want a flat-rate pension or one that increases each year, and whether you also want to provide for dependants’ benefits in the event of your death.
Annuities are subject to annuity rates which are affected by interest rates. When interest rates rise, the organisation selling annuities is able to obtain a greater income from each pound in your AVC fund, and therefore can provide a higher pension. Conversely a fall in interest rates reduces the pension which can be purchased.
