Additional voluntary contributions (AVCs) | Oxfordshire County Council

Additional voluntary contributions (AVCs)

Flexible and tax efficient way to increase your pension.

Additional voluntary contributions (AVC) are a flexible and tax efficient way to allow new members to save up to up to 100 per cent of taxable pay towards increasing their pensions subject to HMRC tax and pension savings limits.

If you pay income tax, you will receive tax relief on the contributions you pay. If you are a basic rate taxpayer, this has the effect of saving you £20 for every £100 of pension contributions you pay. This saving is even higher if you are a higher rate taxpayer.

Your contributions will be invested in the funds of your choice, but managed and administered by our AVC provider Prudential. You will have your own personal account that will increase by your pension contributions and investment returns.

There are no automatic employer contributions to your AVC. When you retire, your personal account will provide a fund value. You will have to decide what you would like to do with your fund, your options are outlined below. Make sure you have the relevant details for your own situation before making financial decisions.

Buying an annuity

This is where a pension provider of your choice takes your AVC fund and, in return, pays you a pension.

You can do this at the same time as you draw your LGPS benefits or you can choose to delay payment until anytime up to the eve of your 75th birthday.

This annuity is paid completely separately from your LGPS benefits and you will have the option of deciding what type of pension you have, that is,  whether you want your pension to provide dependants' benefits in the event of your death.

Take your AVCs as cash

If you draw your AVCs at the same time as your LGPS pension, you may be able to take some or all of your AVCs as a tax free lump sum. If you retire (other than on flexible retirement) and decide to draw your AVCs later, you can have up to 25 per cent of your AVC fund as a lump sum.

Buy additional pension in the LGPS

If you retire with immediate payment of your benefits you may be able to use some or your entire AVC fund to buy a top up pension from the LGPS. This automatically provides inflation-proofed pension and dependants’ benefits and is based on set factors to calculate the costs. These factors are liable to change.

Buy additional membership in the LGPS

If your election to start paying AVCs was made before 13 November 2001, you may be able to convert your AVC fund into additional membership within the LGPS. You will need to stop AVC payments and you must transfer your AVC fund while you’re still a contributing member of the scheme and over the age of 50. There is one exception; if you are retiring due to ill health you may also buy additional membership within the scheme, if you are over 50.

Exit charges may apply

If you joined the AVC plan from 19 August 2012 and withdraw any funds within three years of receipt of your first AVC savings, an exit charge may apply.

Ask the Prudential for details of the scale of charges for new investors from 19 August 2012 and what rates may apply for longstanding investors from before that date.

Please note: The exit charge will be applied after any Market Value Reduction has been  applied to any disinvestment from the With-Profits Fund.

Additional life cover

You can also pay AVCs to provide extra life cover. Your membership of the LGPS already gives a death grant cover of three times your annual pay if you die in service. You can pay AVCs to increase this to provide additional benefits for your family, in the event of your death in service.

Please note that Prudential may, in some circumstances, need medical evidence before the arrangement starts and any extra life cover paid through AVCs will stop when you leave or retire.

Freedom and choice options

There may be greater flexibility in how you use your AVC funds from April 2015. You may be able to transfer the AVC ‘pot’ to an arrangement which from age 55 can offer can offer 25%  tax free lump sums. You are recommended to seek guidance if you are considering a transfer of your AVC funds.    Pension Wise is a new service from the Government that will offer free and impartial guidance. Visit www.pensionwise.gov.uk.

Prudential's contact details

For more information, to start or amend your AVC, you can call 0845 607 0077 during office hours or visit the dedicated LGPS AVC website.

Last reviewed
16 May 2017
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