What are Additional Voluntary Contributions (AVCs)?

AVCs provide an opportunity for employees who are members of the Local Government Pension Scheme (LGPS) to pay additional contributions to increase their pension pot at retirement. We refer to these as standard AVCs.

Standard AVCs are an efficient way to save for retirement because they attract full Income Tax relief on the amount you contribute (subject to certain overall limits set by HMRC and provided your income is sufficient enough to pay Income Tax).

With standard AVCs, the additional contributions go into a pot and this money is invested separately in your choice of fund(s). These are managed by an AVC fund provider such as Prudential or Standard Life. The funds should hopefully grow over time and will be available at retirement. They can be taken as an additional pension of your choice or, subject to certain limits, a tax-free lump sum, or a combination of both. Any interest, income or capital gain earned on the standard AVCs is free from tax while the money is invested in your fund.

What is a Shared Cost AVC and why is it better than a standard AVC?

If your employer has introduced a Shared Cost Additional Voluntary Contribution (Shared Cost AVC) scheme, facilitated by AVC Wise, members of the Local Government Pension Scheme (LGPS) within your organisation now have an opportunity to pay AVCs in a more cost-effective way.

Shared Cost AVCs must be operated on a ‘shared cost’ basis. You will be required to contribute £1 per month into your pension pot. This Income Tax-free contribution will be deducted from your salary and paid into your AVC fund. Your employer will contribute the remaining via a salary sacrifice arrangement.

As an example, if you would like to contribute £50 per month into the Shared Cost AVC scheme, £49 would be contributed via salary sacrifice with £1 being your personal Shared Cost AVC contribution taken as a gross deduction.

The main advantage of Shared Cost AVCs over a standard AVC option is that as well as receiving full Income Tax savings, you will not pay National Insurance Contributions (NICs) on the amount of pay that you have sacrificed. As a result, Shared Cost AVCs allow you to save NICs in addition to Income Tax, therefore increasing your take-home pay when compared to paying into a standard AVC scheme.

For example: If your salary is £25,000 per year and you contribute £3,000 in standard AVCs per year, your Income Tax savings will be circa £600 per year. If you join the Shared Cost AVC scheme, facilitated by AVC Wise, you will benefit from the same Income Tax savings but you will also benefit from NICs savings of circa £360 per year.

What is salary sacrifice?

Salary sacrifice is an arrangement between you and your employer where you formally agree to a reduction in your salary and in return you receive a benefit (in this case the benefit is contributions, paid by your employer, into your AVC fund).

Employers tend to provide a range of benefits using a salary sacrifice arrangement as part of their commitment to help employees reduce their everyday costs.

Who is eligible to participate?

If you are a member of the Local Government Pension Scheme (LGPS) and your employer has chosen to offer you and your colleagues access to a Shared Cost Additional Voluntary Contribution (Shared Cost AVC) scheme facilitated by AVC Wise, then you are eligible to join the scheme. LGPS employees who are employed under a variable contract, casual hours or zero hours contract are not eligible to participate in the Shared Cost AVC scheme.

Can I change my Shared Cost AVC amount?

Yes, it is very straightforward to either increase or decrease your Shared Cost Additional Voluntary Contribution amount at any time. This is done via the AVC Wise website once you have registered at AVCWise.co.uk. Once registered, simply sign in and visit ‘My AVC Wise’, click the ‘Amend’ button and input the necessary details including the new contribution amount.

How do I join?

If your employer is offering you and your colleagues access to the Shared Cost Additional Voluntary Contribution (Shared Cost AVC) scheme facilitated by AVC Wise, please either sign in or register by clicking the buttons at the top of this page. Alternatively, you can visit www.AVCWise.co.uk/register

If you’re registering for the first time, once you have filled in your details you will receive an email from AVC Wise to confirm your registration. Click the link in the email to confirm your account, and you will then be able to sign in.

Once signed in, you can view a more comprehensive FAQ document which features your organisations’ Shared Cost AVC scheme details. You can also read the Terms and Conditions of the scheme too.

If you already contribute to a standard AVC scheme you may have already received initial communications from your employer about the transition to Shared Cost AVCs. However, if you haven’t received any communication please contact us here.

If you don’t currently make standard AVCs and you wish to join the Shared Cost AVC scheme, please click the ‘New AVC Wise Application’ button available at the bottom of the page once you’ve signed in and fill in the necessary details.

If you have any queries throughout any of this process, please contact us here.