Paying Additional Voluntary Contributions (AVCs) arranged through the LGPS (in-house AVCs)
All local government pension funds have an AVC arrangement in which you can invest money, deducted directly from your pay, through an AVC provider (often an insurance company or building society).
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.
You can elect to pay an AVC if you are in either the main or 50/50 section of the Scheme.
How much can I pay?
You decide how much you can afford to pay. You can pay up to 100% of your pay into an in-house AVC in each job where you pay into the LGPS.
Your employer can also pay towards your AVC. This is known as a Shared Cost AVC.
How do I pay AVCs?
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.
Paying in-house AVCs to provide extra life cover
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.
When does payment of AVCs cease?
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.
Am I likely to be affected by the Annual Allowance?
Most people aren’t affected by the annual allowance because their pension savings don’t increase by more than £60,000 in a year.
For more information about investing in an in-house AVC, please contact us on 0151 242 1396.