AVCs and Shared Cost AVCs
Additional Voluntary Contributions (AVCs) allow you to boost your LGPS benefits by paying in additional contributions each month, aside from your regular monthly contribution.
You can pay up to 100% of your pensionable pay into an in-house AVC in each job where you pay into the LGPS.
Your contribution will be taken out of your next available pay period, before tax, once your election has been accepted.
When considering how to use your AVCs at retirement you have several options:
- Buy an annuity
- Buy a top-up LGPS pension – If you retire with immediate payment of your benefits you may be able to use your AVC fund to buy an annuity from the main scheme.
- Take your AVC as cash
- Buy extra membership in the LGPS (only if AVC contract taken out before 13/11/2001)
- Transfer your AVC to another Pension Scheme
These options are explained further in our ‘topping up your pension’ guide which can be viewed on the Forms and Guides webpage.
Your employer can also pay towards your AVC. This is known as a Shared Cost AVC and is an employer discretion. You should check what your employer’s Discretions Policy says about Shared Cost AVCs.
The Funds ‘In-House’ provider is the Prudential. You can find out more information on AVCs by visiting their website at www.pru.co.uk.
Please remember, AVCs are investment based so the value of the investments can go down as well as up, so you may not get back all you have invested.
Changes to AVC Contracts taken out before 1 April 2014
If you started paying AVCs before 1 April 2014 the rules around your contract were slightly different to the those for contracts taken out after 1 April 2014. If you have not yet taken payment of your AVCs, the below changes now apply to your previous contract following the introduction of the LGPS (Amendment) Regulations 2018.
- The maximum contribution limit has increased from 50% to 100% of pensionable pay.
- AVCs will now also be deducted from any voluntary overtime you work (if you pay AVCs as percentage of your salary).
- When you take your main scheme benefits you will no longer be able to leave your AVC invested and take it later.
- If you leave the scheme with a deferred benefit you can now buy additional pension from the LGPS with your AVC plan when you take your benefits from the scheme. Before the change, this option was only available to members who took immediate payment of their main scheme benefits and their AVC plan when they left the scheme.
- You can now nominate who will receive a death grant payment, should you die before taking your AVCs.
- If you have more than one AVC pot, either through different jobs or a transfer of AVC benefits from elsewhere, these pots will be automatically joined together when your main benefits are combined. Previously you used to have to tell us to do this.
Please be aware that some of your old contract rules remain the same. These are that your normal pension age stays at age 65, and if you started your contract before 13 November 2001, you still have the right to buy scheme membership in some cases.
For information about the other ways you can use your AVC plan see the national LGPS website – www.lgpsmember.org/more/AVCoptions.php.