Additional Voluntary Contributions (AVCs)

When you pay Additional Voluntary Contributions (AVCs), you build up a pot of money which is used to provide benefits on top of your LGPS benefits. AVCs are taken directly from your pay before your tax is worked out, so if you pay tax, you receive tax relief automatically.

 

Merseyside Pension Fund has a choice of two current providers: Prudential or Standard Life, and one provider which is now closed to new contributors, Equitable Life.

 

If you choose to pay AVCs under the LGPS, the AVCs are invested separately in funds managed by the AVC provider.  You have your own personal account that, over time, builds up with your contributions and the returns on your investment, and will be available to you when you retire. You can often choose which investment route you prefer.

 

 

There is no limit on the amount of pension contributions you can pay. You will only get tax relief on:

 

 

There are HM Revenue and Customs limits on the pension savings you can have before you have to pay extra tax. Most people will not be affected by these limits but if you are considering paying additional contributions you should be aware of them.

 

You are more likely to be affected if you are a higher earner or if you pay a large amount of extra contributions in a year. See the section on Tax controls and your LGPS benefits to find out more.

 

AVCs are deducted from your pay, just like your normal contributions. Your LGPS and AVC contributions are deducted before your tax is worked out, so, if you pay tax, you receive tax relief automatically through the payroll. You qualify for tax relief (normally at your highest rate) on all pension contributions up to 100% of your taxable earnings, including your normal contributions.

 

Deductions start from the next available pay period after your election has been accepted and you may vary or cease payment at any time whilst you are paying into the LGPS.

 

AVCs automatically cease one month prior to retiring. This allows the disinvestment process to align with the Fund’s retirement processing timescales and allow the timely payment of retirement benefits. The exception to this is when AVCs are paid for extra life cover. These will continue until you leave or draw your LGPS benefits.

 

Shared cost AVCs

Your membership of the LGPS already gives you cover of three times your assumed pensionable pay if you die in service, but you can pay AVCs to increase this and to provide additional benefits for your dependants in the event of your death in service.

 

This may be subject to satisfactory completion of a medical questionnaire. Any extra life cover paid for through AVCs will stop when you retire or leave.

 

For more information about investing in an in-house AVC, please contact us on 0151 242 1396.