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You are here: Home / Current Employees / Additional Voluntary Contributions (AVCs)

Additional Voluntary Contributions (AVCs)

Whether you’re close to retirement or it’s still a long way off, it’s not too early or too late to start thinking about the kind of lifestyle you want when you stop working. AVCs could be just the thing to boost your retirement benefits and help you to achieve your retirement dreams.

Let’s take a look at what they are and how they work, so you are better informed to decide if AVCs are right for you.

Benefits

  • AVCs allow you to build up a separate pot of money alongside your Local Government Pension Scheme (LGPS). This can then be used to provide you with additional retirement benefits.
  • The contributions you make are tax efficient as you pay the money in directly from your salary before tax.
  • You can stop, restart and change them any time although, as you may expect, if you do stop or reduce your AVCs, it will affect how much money you will eventually have. Charges will continue to be deducted even if you stop contributing.
  • Your AVC pot is invested in funds and you choose which ones are right for you.

As AVCs are investment based, it’s important to remember that the value can go down as well as up and you may not get back the amount you put in. The tax you pay depends on your individual circumstances. HM Revenue & Customs tax rules may change in the future.

Contribution level

Subject to scheme and tax allowance limits, you can pay in up to 100% of your pensionable pay each month after other deductions such as National Insurance and your LGPS contribution are taken. If you’re increasing your contributions and your AVC plan started before 1 April 2014, you can pay in up to 50% of your pensionable pay each month.

Taking your money

From age 55, you can take up to 100% of your AVC as a tax-free lump sum at the same time as linked main scheme benefits. (This is as long as the total lump sums you take from the LGPS do not exceed 25% of the combined value of the benefits you take at that particular time from the LGPS, including your AVC.)

Of course you also have other options:

  • You can do nothing and leave your money where it is: Reaching age 55 does not mean you have to start taking money from your pot – you can leave it where it is.
  • You can have a guaranteed income for life: A lifelong, regular income gives you a guarantee that the money will be paid as long as you live. Potentially up to 25% of your pot can be taken tax-free. The income you get is taxable.  This option is also known as an annuity. You are only able to access your AVC benefits in this way at retirement or, subject to certain conditions, after retirement.
  • Take a tax-free lump sum and more LGPS benefits: You can usually take up to 25% as a tax-free lump sum and use the rest to give you more LGPS main benefits. You are only able to access your AVC benefits in this way at retirement.
  • Transfer out: You can transfer your AVC pot to another product at any time before or after age 55. Transferring out will enable you to access options such as partially taxable cash withdrawals or flexible income from age 55. You can choose a product from Prudential or another provider of your choice.
  • You can choose a combination of the options: You can mix some or all of these options, over time or over your total pot. Remember if you transfer to another product, you need to transfer the full value of your AVC pot. There are specific rules which apply to flexible retirement and your scheme administrator will be able to tell you what you can do and when with your AVC. If you transfer we recommend you get guidance or advice to help you with this decision. Pension Wise is a free, impartial service offered by the Government to provide guidance once you reach age 50 to help you understand your options at retirement. You can find out more at www.pensionwise.gov.uk or by calling 0800 280 8880 to book a phone or face-to-face appointment. We recommend that you use this service to help you understand your options.

Other options to increase your LGPS retirement benefits

Your LGPS provides other options for increasing your retirement benefits – you can find more information on your LGPS website.

Find out more

To find out more about AVCs, please visit  www.pru.co.uk/localgov.

You can apply online at www.pru.co.uk/localgov. Once you become a member of an AVC arrangement, member support will be available via phone on 0345 6000 343.

Prudential is a trading name of Prudential Distribution Limited. Prudential Distribution Limited is registered in Scotland. Registered Office at Craigforth Stirling FK9 4UE. Registered number SC212640. Authorised and Regulated by the Financial Conduct Authority.

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Oystermouth Road
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SA1 3SN
01792 636655
pensions@swansea.gov.uk

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