New rules from 1st April 2011 will mean that pensions tax relief is restricted to “deemed contributions” of £50,000 in any one year. If your “deemed contributions” are more than that you will need to declare them on a self assessment tax form by 31st January in the following year.
We have developed the valuer as a tool to help you to assess whether you can expect a tax liability as a result of being a member of the LGPS.
The valuer is accessible by clicking on the link at the bottom of this page.
The valuer has been designed to give you an estimate of your “deemed contribution” for personal income tax purposes based on:
- Your pensionable service (that must be at least a full year at 1/80 or 1/60 in the lead up to the event date).
- Your pensionable pay.
- Your AVCs paid in the year.
- The growth in the CPI (Consumer Prices Index) over the year to the 30 September before the start of the scheme year in question.
- The scheme year you wish to use.
The estimate will be for any one particular scheme year (to 31 March) taken in isolation.
You may wish to run it for up to 4 scheme years, as any unused annual allowances may be carried forward from up to 3 previous years.
It should only be used if you work full time and should be run separately for each job or post that you hold.
It is not suitable if your employer has augmented your pensionable service during the year, or if your pensionable service has been enhanced for ill health.
Before using the valuer, please take time to read the guidance below.
What you need to input
The valuer works by asking you to input information into a number of fields. You can move between each of these fields by clicking on the box required or by using the tab key.
Event date – This should be the 31 March at the end of the year for which you are seeking to derive your “deemed contribution”.
Pensionable pay - Your pensionable pay is your annual salary including all contractual elements such as non standard working pattern payments or working context and demands payments if applicable. For the current year you should be able to get this information from your pay slip. Your pensionable pays for previous years can be found from your annual benefit statements.
To request a password for TOPS, go to our website’s homepage and click on “I am interested in TOPS (The Online Pensions Service)”.
Pensionable service - You will find the length of your pensionable service detailed on your annual benefit statement or from TOPS (as described in the “pensionable pay” section above). This must be at least a year in the lead up to the event date.
There are four pensionable service fields.
The first two are for your service up to 31 March 2009 (which was accrued prior to the last changes to the LGPS and has an accrual rate of 1/80ths.)
The second two are for your pensionable service from 1 April 2009 (when the accrual rate increased from 1/80ths to 1/60ths.)
AVCs – This should be the annual gross amount you paid over the year.
CPI growth rate – For each scheme year the appropriate rate shown below should be used.
Scheme year 2012/2013: 5.2%
Scheme year 2011/2012: 3.1%
Scheme year 2010/2011: 1.1%
Scheme year 2009/2010: 5.2%
Scheme year 2008/2009: 1.8%
For future years the CPI rate is not known, so you need to input an estimate. You can choose your own estimate: the lower the rate you use, the higher the “deemed contribution” will be.
Calculating your “deemed contribution”
All you have to do now is hit the button and the valuer will provide you with your estimate.
But bear in mind that:
- You may wish to run the valuer again for previous scheme years, as any unused annual allowances may be carried forward from up to 3 previous years.
- If you are close to the limit you should reconsider any AVC payments you are making and the Prudential can be contacted at: http://www.pru.co.uk/content/schemes/localgovavc/
- HMRC are still developing the new rules and may introduce alternative methods of payment. We will provide further updates and information on the treatment of linking deferred pensionable service to current pensionable service, ARCs and added years as it is becomes available.
Printing your estimated “deemed contribution”
If you want to keep a copy of the estimate for your records click on the print button and follow the online instructions. This converts the information on screen to a report format. Alternatively click on the printer icon on your toolbar for a copy of what you see on screen.
Exiting the valuer
All personal information used to provide your estimate will be deleted when you exit the calculator. Alternatively you can click on the cancel button to erase your details before exiting the calculator.
Further information
Before making any decisions you should consider taking financial advice. The Financial Services Authority (FSA) has a helpful website at: www.fsa.gov.uk or www.moneymadeclear.fsa.gov.uk.
You may also want to discuss any tax implications with your local tax office. An overview of income tax is available at
http://www.hmrc.gov.uk/rates/it.htm
More information about the new pension taxation rules is also available at:
http://www.hmrc.gov.uk/pensionschemes/annual-allowance/reduced.htm#8