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 members to save up to 100 per cent of taxable pay towards increasing their pensions; - subject to HMRC tax and pension savings limits and LGPS regulations.

If you pay income tax, you will receive tax relief on the contributions you pay, as these contributions are deducted before your pay is assessed for tax.

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 reflect your contributions and investment returns. The Prudential will provide information about the funds available and give indications on their ‘risk’levels, and let you know when the profile of the funds change.

There are no automatic employer contributions to your AVC. You should ask your employer if they have a policy to assist or share in 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.

From 2015 additional flexibilities for your AVC fund may be available before drawing your main LGPS pension, subject to the current HMRC tax and pension saving limits.    

Your retirement options include:

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 the LGPS ‘Flexible Retirement’) and decide to draw your AVCs at a later date, you can have up to 25 per cent of your AVC fund as a lump sum.

Taking your main LGPS pension as an employer agreed ‘Flexible Retirement’ means you must take your AVC fund, you can continue to pay AVCs  with your continuing employment, but you must set up a new arrangement.   

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.

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 factors, which do change from time to time, to calculate the costs..

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.

PLEASE NOTE - You must 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.  You can ask Pension Services for an estimate before committing to this action. 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 your first AVC contribution was received by the Prudential before 19 March 2017, there is a charge, capped at 1%, if funds are withdrawn within 3 years of the first contribution and 0% thereafter, regardless of age.
  • If the first contribution received on or after 19 March 2017 – there is no exit charge  
  • If you use the ‘With Profits’ fund a market value reduction will apply if funds are realised before the retirement age you stated when you began to contribute  - ask Prudential for details of the current charge        

A market value reduction may apply if you switch funds from the With Profits to other fund choices, please contact the Prudential for more information.

If in any doubt ask the Prudential for details of charges

Please note: Any 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 approximately three times your annual pay if you die in service. You can pay AVCs to increase this and 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. Any  extra life cover provided through AVCs will cease when you leave or retire, or stop contributing for any other reason.

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 sum before your LGPS retirement age. 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

After using a flexible draw down option, there are limits to the level of continued defined benefit contributions you can make. From April 2018 the limit is £4000 in a year.  

Contact Prudential

Prudential’s new site is at The Prudential describes their site as 'informing you about how you can improve your pension benefits by making additional voluntary contributions'.

The new site provides:

  • concise, easy to understand content – on one page.
  • new, extended range of case studies – for both new members and those wishing to increase contributions.
  • two new calculators – one for new members, one for existing members.
  • guidance and clear signposting throughout the site - helping you find the most relevant information to you quickly.
  • improved online application forms.
Last reviewed
19 December 2017
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