With AVCs you pay extra contributions into your fund's AVC plan.
The benefits
- AVCs don't buy an amount of pension but build up a fund value which you can then use to buy benefits at retirement.
- You can take your whole AVC pot as a lump sum if you take it at the same time as your main LGPS benefits and the total lump sum (AVC pot + LGPS Lump sum added together) is not more than 25% of the total value of your overall benefits.
- You can choose the benefits that you purchase at the time of your retirement such as whether a spouse’s pension is payable and whether your pension increases in line with inflation or not.
What if I die – is there any extra death cover?
No – but if you die, the pension pot you have built up will be paid out as a death grant. Please note that it may be possible to pay AVCs to buy life cover only – Prudential offers this, and if you are interested, you should contact them about it if your fund uses them as a provider.
Flexible payments and investment options
- You choose how much you want to pay each pay period.
- Contributions are flexible
- The amount you pay in and the investment option you choose will affect the amount you build up in your pension pot.
- If you pay tax, deductions taken from your salary will receive automatic tax relief.
The AVC Provider offers a range of investment funds for you to choose from. AVCs are a form of investment and so there are no guarantees, the value of your fund could go down as well as up. Administration charges apply to your AVC fund - your provider will tell you what the charges are.
If you stop paying or leave employment
- You can stop paying AVC contributions at any time by contacting your AVC provider. The AVC fund you've built up will continue to rise and fall with the fluctuation in investment returns.
- If you retire because of ill health from active employment you won't receive any enhancement to your AVC fund.
- If you leave before your LGPS benefits are payable your AVC fund will remain invested. You'll be able to use your AVC fund to get additional pension benefits when the rest of your benefits are paid.
- If at the time you leave employment you are only entitled to a refund of your contributions, your AVC fund will also be refunded.
Important changes coming if you pay into a shared cost salary sacrifice AVC plan
The government has announced that from April 2029, only the first £2,000 of employee pension contributions made through salary sacrifice each year will be exempt from National Insurance Contributions (NIC).
Any amount paid into an AVC through a salary sacrifice plan above £2,000 will be subject to National Insurance Contributions at your usual rate from April 2029. This will be deduced automatically by your employer. If you pay less than £2,000 a year into an AVC via salary sacrifice then you won't be affected by this change.
You will continue to receive income tax relief on any salary sacrificed pension contributions.
Find out more
If you're interested and for more information about the AVC plans your fund has, read more below below:
