What are AVCs?
Additional Voluntary Contributions (AVCs) are a tax-efficient way of paying extra savings towards your pension. They are contributions that are taken directly from your pay each month and are used to buy 'units' in investment funds.
Although the AVC arrangements are part of the main ABF Pension Scheme, your AVC savings are invested separately in the Defined Contribution (DC) section. Your contributions buy 'units' in investment funds. The number of units you hold increases every time a contribution is paid. The price of units changes each day; the unit price of each investment fund reflects the performance of that particular fund's assets.
The Company does not contribute to the AVC arrangements.
You may pay up to 100% of your Contribution Earnings in Scheme contributions and AVCs. However, if when you add the AVCs that you have paid in a year (and contributions to any other schemes) to the increase in the value of your pension, and they exceed the Annual Allowance (AA), you will have to pay tax at your marginal rate on the excess amount over the AA. For further information, please click here.
On withdrawal before normal retirement date, you stop paying AVCs and they must be treated in the same way as other Scheme benefits:
- If you defer your benefits under the ABF Pension Scheme, then your AVCs will remain invested in the AVC plan, until such a time as you retire or transfer your total benefits to another pension scheme.
- If you transfer your ABF benefits, your AVCs must also be transferred.
Prior to October 2004
AVCs are invested in funds through the AXA Wealth platform. However, if you joined the AVC Plan before October 2004, you may still have investments in one or more of the former AVC investment arrangements with Clerical Medical, Standard Life, London Life, Prudential & or Equitable Life. Please refer to the AVC booklet for further details.
AVCs generally attract income tax relief at the highest rate you pay. If you are paying tax at a rate of 20%, this means that every £1 you save will only cost you 80p.
The Trustee will pay to your beneficiaries the fund value of your AVCs together with the death benefits from the ABF Pension Scheme.