Additional Voluntary Contributions
When you pay Additional Voluntary Contributions (AVCs), you build up a pot of money which is used to provide benefits on top of your LGPS benefits. AVCs are taken directly from your pay before your tax is worked out, so if you pay tax, you receive tax relief automatically.
All local government pension funds have an arrangement with an AVC provider that you can invest money in – an in-house AVC. The AVC provider is often an insurance company or building society. You have your own personal account and you decide how the money in your pot is invested.
You can pay AVCs if you are in the main or 50/50 section of the LGPS.
You can pay up to 100% of your pensionable pay into an in-house AVC.
Contact your pension fund for more information about paying AVCs and how to start a contract.
Shared cost AVCs
Your employer can also pay towards your AVC at their discretion. This is known as a Shared Cost AVC. Your employer may offer a Shared Cost AVC through a salary sacrifice arrangement. You do not pay tax or National Insurance contributions on the AVC contributions paid through a salary sacrifice arrangement. Your employer also benefits because they pay lower national insurance contributions.
Check with your employer whether they offer a Shared Cost AVC scheme.
AVCs for life cover
You can pay AVCs to provide extra life cover. As an active member of the LGPS, you already have cover of three times your pay if you die in service. You can pay AVCs to increase this cover and to provide additional benefits for your dependants if you die in service. Any extra cover you buy will stop when you retire or leave. Not all AVC providers offer extra life cover.
Taking your AVCs
See Taking your pension and paying extra to find out about the different ways you can use your AVC fund when you take your LGPS pension. You can transfer your AVC to another pension arrangement. Read more about this option in the next section.
Deciding how to use your AVC plan is one of the most important financial decisions you will make. You should consider getting guidance or independent financial advice to help you when you are making your decision.
Pension Wise, a service from MoneyHelper, is a free, impartial service offered by the Government to help people over 50 understand their pension option. This includes your AVC options. You can find out more on the Pension Wise website - This link opens in a new browser window or by calling 0800 138 3944 to book a phone, online or face to face appointment. You can also use MoneyHelper to help you Find a retirement adviser - This link opens in a new browser window.