Skip to content

Hertfordshire
search button
Hertfordshire County Council

An Additional Voluntary Contribution (AVC) is where payments are taken directly from your pre-tax salary and are put into an investment fund, which grows over time and helps to boost your retirement savings.

 

How does an AVC work?

An AVC does not include employer contributions and isn’t part of your LGPS pension fund. Instead, your money will be invested by Standard Life and comes with a completely different set of rules. Here is how it works:

  • Standard Life will set you up with your own personal account.
  • You choose how much you invest and the risk level.
  • Your money builds up over time. As an investment, this depends on how well the fund performs. It is important to note, that the value may go down and you could get back less than you put in.
  • You can take the money as a tax-free lump sum or put it towards your retirement income.

 

How much can I pay in?

In theory, you can pay up to 100% of your salary into an AVC – either as a fixed amount or as a percentage of your pay. But before you make any quick decisions, it is important to get advice from an independent financial adviser.

 

Are AVCs eligible for tax relief?

Yes, all of your LGPS and AVC contributions are deducted directly from your pre-tax salary and eligible for tax relief in the same way. And both contribute towards your annual allowance. 

Putting your AVC to good use

You can use the money to match your lifestyle. It is important to choose the options that are right for you.

  1. Take up to 100% of your in-house AVC as a tax-free lump sum. 
    2. You can take some or all of your AVC plan as a tax-free lump sum, provided that:
    • The total tax-free lump sum is not more than 25% of the overall value of the benefits you are taking. The total lump sum is any lump sum you take from your main LGPS benefits plus the AVC lump sum.
    • The total tax-free lump sum is not more than your lump sum allowance.
    The lump sum allowance is £268,275. It may be lower if you have already taken payment from a UK pension arrangement. 
  2. Buy an annuity from a bank, building society or insurance company
    3. You can use your AVC to buy a regular income for the rest of your life, known as an annuity. When you buy an annuity, you can usually take some of your AVC as a tax-free lump sum at the same time.   The amount you get depends on: 
    • How much your AVC is worth 
    • Your age 

  3. Buy a top-up LGPS pension
    4. If you joined the LGPS on or after 1 April 2014, you can use some or all of your AVC to buy a top-up LGPS pension. The extra pension you buy increases in line with inflation and will automatically be passed on to your dependents (like spouses or children) in the event of your death.
  4. Buy an extra LGPS membership
    5. As long as you started paying AVCs before 13 November 2001, you can use the money to buy an extra LGPS membership (years of service). If this is something you want to consider, please contact the LPPA and they will be able to explain your options.
  5. Transfer your AVC to an independent pension scheme
    6. Even if you’re still paying into your LGPS pension, you can transfer your AVC to an independent scheme as long as:
    • you have stopped paying into any other LGPS AVC schemes
    • you are not receiving a regular income from an annuity or a top-up pension as the result of a previous LGPS AVC plan
    • you transfer out of all other LGPS AVC plans (other than those awarded to you as part of a divorce settlement)
    If you joined the LGPS after 31 March 2014  you can only transfer your AVC before you take your main LGPS pension.  If you do choose this option, be aware that scammers do operate in these markets. So, be sure to get independent advice before transferring any cash. The Pension Regulator website is a good place to start.
  6. A combination of the above 

Knowing how to use your AVC isn’t always easy. If it helps, you can always choose a combination of the above. But before you make any decisions, be sure to get some expert advice. If you do not already have a financial adviser, Pension Wise is a free, impartial service offered by the Government to help you understand your AVC options once you reach the age of 50. Visit www.pensionwise.gov.uk or call 0800 138 3944

Accessing your AVC

Just like your LGPS pension, you can access your AVC from the age of 55 or leave it until you’re 75. However, if you were a member of the LGPS after 31 March 2014, you must take your AVC at the same time as your main scheme benefits (unless you take flexible retirement).

Flexible retirement

Flexible retirement allows you to take some or all of your pension while still working. If you started paying into an AVC after 13 November 2001, you can leave your AVC in place after taking out your main LGPS pension. This allows you to save more money for when you stop working. If you started paying into an AVC before 13 November 2001, you must take out your AVC and main LGPS pension at the same time.

Defer up to the age of 75

If you left the LGPS before 1 April 2014 and want to save more towards your retirement, you can choose not to take your AVC when you take your main LGPS benefits. You can leave your AVC invested (defer) and take it later but you must take it by age 75. Just remember that deferring your AVC limits some of the options that will be available to you when you do take it.

Don’t get caught short!

Finally, please be aware that if you continue paying AVCs up until you retire, your first pension payment could be delayed for up to two months due to the time it will take to disinvest your funds.

 

Applying for an AVC

If you are interested in an AVC it is important that you fully understand what the investment entails, and you make an informed decision on this by seeking independent financial advice.

For information on the Group AVC plan please visit the Standard Life Website. The investment options booklet can be viewed on the Important Documents page. 

How to apply for your AVC

Please complete the ‘Standard Life AVC Form’ and upload this via the secure online contact form on the LPPA website. Upon receipt of your AVC form, LPPA will process this with Standard Life who will then request LPPA to issue instructions to your employer or payroll provider to request that they start deducting your AVC contributions and commence paying them to Standard Life. Once this has been actioned you will receive a membership certificate from Standard Life together with a welcome pack. Within the welcome pack, you will find details of joining the online portal. We encourage that you do this promptly to be able to view your investment and keep your details up to date.

As previously mentioned, any historical AVCs that were invested with Equitable Life are now managed by Utmost Life and Pensions Limited. If you have a previous arrangement or are currently contributing to an AVC that was with Equitable Life and you would like to make changes to your investments/plan, please register to access the online member’s portal available through the Utmost Website. 

 

Rate this page

Rate this page as Good Rate this page as Average Rate this page as Poor