Frequently asked questions about Additional Voluntary Contributions AVCs
Frequently asked questions about Additional Voluntary Contributions AVCsWhat is an AVC Plan?
What might I get when I retire?
What choices will I have when I retire?
How much can be paid into my plan each year?
What about tax?
What happens to the plan if I die before I retire?
What happens if I change jobs?
What is an AVC?
An Additional Voluntary Contribution (AVC) is a pension plan to help you save for your retirement in a tax-efficient way. It operates alongside your company pension scheme to provide for your retirement.
What might I get when I retire?
The final value of your plan will depend on the length of time you have been saving, the amount contributed to your plan, investment growth within the selected investment funds and the charges deducted. Your pension will depend on interest rates at the time you convert the plan into a pension.
What choices will I have when I retire?
Unless your company pension scheme allows otherwise, you will normally have to take your AVC pension at the same time as you take your pension from your company pension scheme. The earliest date at which you can retire will be defined in your company pension scheme’s rules. It is likely that benefits can be taken between the ages of 55 and 75, although the rules may allow for retirement as early as age 50. You can convert all of your AVC plan value into a pension, which will be taxable. Or, depending on the rules of the company pension scheme, you may instead be able to take up to 25% of the total combined value of your AVC and company pension scheme benefits as a tax-free cash sum in return for a smaller pension.
How much can be paid into my plan each year?
It is possible for you to pay up to 100% of your relevant UK earnings in a tax year into pension arrangements and receive tax relief on the contributions. This includes contributions paid to your company pension scheme, your AVC plan and any other pension arrangements you may have, such as a stakeholder pension plan. An Annual Allowance applies, and if the total value of pension savings by you and your employer exceeds the Annual Allowance, the excess is subject to a 40% charge, which will be payable by you.
What about tax?
Your contributions qualify for full income tax relief at your highest rate. Your regular contributions will be deducted from your gross pay by your employer and passed to us. As your income tax is based on your pay after deducting AVCs, you automatically receive tax relief at your highest rate.
HM Revenue & Customs recommends that single contributions are also deducted through payroll to ensure that you receive tax relief at the highest rate.
What happens to the plan if I die before I retire?
We'll pay the plan value to the Trustees of your employers' scheme who will then decide who to pay it to. When deciding who to pay it to the Trustees will take into account any nominations you may have made.
What happens if I change jobs?
Your AVCs will be dealt with in exactly the same manner as your company pension contributions: Therefore
- Your AVCs will be dealt with in exactly the same manner as your company pension contributions.
