Additional Voluntary Contributions
Additional Voluntary Contributions (AVCs) are a way for you to make extra savings towards your retirement. AVCs are paid in addition to any contributions you may already be paying to your main company pension scheme.
The two main reasons for paying AVCs are:
- to have additional income in retirement
- to be able to retire earlier than your scheme's normal retirement age.
As with your normal scheme contributions, AVCs attract tax relief up to a limit at your marginal rate of income tax. This makes them a highly tax efficient way of saving for retirement.
The Inland Revenue sets limits on the overall amount you are allowed to pay into a pension scheme – your employer will be able to give you details of the level of AVCs you can pay.
You will normally be given a number of options as to how your AVCs are invested in your scheme. Your Scheme Booklet should give you details of the investment choices available to you.
Your choice of investments is important because your final pension will depend, amongst other factors, on how well the investments held in your account perform prior to your retirement. You'll need to keep your investment choices under review as you progress through your working life, as changes in your financial or personal circumstances may affect your decision.
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