Tax and your pension

One of the benefits of the Local Government Pension Scheme (LGPS) is that there is tax relief on the contributions you pay into the scheme.

There are controls on the total amount of contributions you can make into all pension arrangements and receive tax relief on, and on the pension savings you can have before you become subject to a tax charge. This is in addition to any income tax you pay on your pension once it is in payment.

Most people will be able to save as much as they wish as their pension savings will be less than the allowances.

At the present time there is no overall limit on the amount of contributions you can pay, although there is a limit of £7,579 (from 1 April 2023) on the extra LGPS pension you can buy by payment of Additional Pension Contributions (APCs).

Although there is no overall limit on the amount of contributions you can pay to all schemes, tax relief will only be given on contributions up to a total of 100% of your taxable earnings in a tax year (or, if greater, £3,600 to a 'tax relief at source' arrangement, such as a personal pension or stakeholder pension scheme).

If you have an Additional Voluntary Contributions (AVCs) contract which started before 1 April 2014, you are limited to paying 50% of your pay each pay period into your AVC. That limit does not apply if you have an Additional Voluntary Contributions (AVCs) contract which started on or after 1 April 2014.

Under current Scheme rules there are two controls set by His Majesty's Revenue and Customs (HMRC) - the annual allowance and the lifetime allowance.

You can get more information about tax allowances for both the annual and lifetime allowance, and protections that are in place, as well as special provisions for very high earners from HMRC at GOV.UK: Tax on your private pension.