Additional Voluntary Contributions (AVCs)
AVCs allow you to pay more to build up extra savings for your retirement.
When you save AVCs, you pay money into a separate AVC plan, in addition to the main Local Government Pension Scheme (LGPS). You build up a pot of money that you use to provide additional benefits to your main LGPS benefits.
Your AVC plan becomes payable when you take your main LGPS benefits.
AVC contributions are taken directly from your pay before your tax is worked out, so, if you pay tax, you receive tax relief automatically.
The amount of tax relief you receive depends on whether you are a basic, higher or additional rate taxpayer. If you don’t pay tax, you won’t benefit from tax relief.
You have your own personal account that, over time, builds up with the contributions you pay in. The amount in your account depends on how long you pay AVCs for, the impact of charges and how well the fund(s) you invest in perform. You choose how the money in your AVC plan is invested.
Your AVC plan is an investment, and the value can go down as well as up. You may not get back what you put in.
You can pay up to 100% of your pensionable pay (subject to other deductions made by your employer) into an AVC. You may wish to get independent financial advice about taking out an AVC.
Flexible contributions
You can choose to pay a fixed amount or a percentage of your pay, or both, into an AVC – as long as it does not exceed 100% of your pay.
AVCs are taken from your pay, just like your normal pension contributions. Deductions start from the next available pay period after you set up the AVC. You may change your contributions or stop paying AVCs at any time while you are paying into the LGPS.
You can pay AVCs if you are in the Main or 50/50 section of the LGPS.
How you save with an AVC
The Funds AVC provider Legal & General (L&G) will set up your own personal account. Your account builds up over time with your contributions and any investment returns you make.
The amount in your account will depend on how long you pay AVCs for, the impact of charges and how well the fund(s) you invest in perform.
You choose how the money in your AVC plan is invested. The investments on offer will have different risk levels – the higher the risk, the higher the potential rewards. The lower the potential rewards, the lower the risk.
You may be able to spread your investments (and risks) over a number of investment areas such as equities (shares), bonds, property and cash. Each have their own risks and potential rewards.
As with all investments, the value may go up or down and you may not get back what you put in.
What can I use my AVC for?
When you retire you can use an AVC to:
- buy an Annuity (Regular income paid for the rest of your life)
- buy a Top-up of your annual LGPS Pension
- take your AVC as a tax-free cash lump sum
- buy extra membership in the LGPS (if you took out your AVC plan before 13 November 2001)
- transfer your AVC fund to another pension scheme or arrangement
You can find out more about how Additional voluntary contributions (AVCs) work in the LGPS by downloading our Building extra savings - A guide to AVCs (PDF, 179.89KB).
What happens to my AVC if I leave before retiring?
If you leave before retirement, your contributions will stop when you leave.
The value of your AVC plan will continue to be invested until it is paid to you. You can transfer your AVC plan to one or more different pension arrangements or take it at the same time as your LGPS benefits.
What happens to my AVC if I die before taking it?
If you die before taking your AVC plan, it will be paid as a lump sum. Your AVC provider will pay the amount due to your Fund who will then make payment in accordance with the Scheme rules.
If a lump sum is to be paid from your AVC fund, we have absolute discretion over who receives any lump sum. It is helpful if you let us know your wishes by telling us your expression of wish nomination.
Shared cost AVCs
A shared cost AVC (SCAVC) is an AVC plan arranged through the LGPS that both you and your employer contribute to. Your employer can choose to offer SCAVCs.
Applying for an AVC
AVC applications are made directly with Legal & General.
You can find more about the investment options and the terms and conditions of the AVC arrangement at the Legal & General website.
Once you have completed your application with Legal & General please return your form to us to set up your AVC with your Employer.
Payments will usually start one calendar month after your application has been made.
Increasing or reducing your AVC payment
If you have an AVC and want to increase or decrease the amount you pay, please contact us with your updated AVC amount and the date you would like this to take effect. We will then make the necessary arrangements with your employer payroll provider.