If you belong to your current employer's pension scheme you may be entitled to make Additional Voluntary Contributions (AVCs) to increase your pension and other benefits from your company pension scheme. Normally you can make regular or one-off payments but the total amount you pay for AVCs and your ordinary contributions made by you must not exceed 15% of your earnings. Government legislation currently imposes an upper limit on how much you can pay in total in a year. If your employer's scheme is a Group Personal Pension you top-up your benefits by increasing your contributions to the scheme not by using AVCs. This is because it is effectively a Personal Pension and is treated accordingly.
There are two types of AVCs:
In-house AVCs where you pay into a scheme run by your employer. Charges for In-house schemes are often lower than for FSAVCs.
Free Standing Additional Voluntary Contributions (FSAVCs) where you pay into your own scheme that is normally run by an insurance company of your choice.
Your money can be invested in a range of funds depending on the amount of risk you are prepared to accept. However FSAVCs usually offer additional options for investing in higher risk or more diverse funds with the potential for higher returns if the funds perform well. Currently both types of AVC receive the same tax benefits. You should remember that you will not be able to receive the benefits from your contributions until you retire.
The size of your additional retirement fund depends on the AVC contributions made and the fund's investment performance. Upon retirement, your fund is used to purchase an Annuity that provides you with an additional pension income. AVCs are separate from a company scheme and is a top-up to your Occupational or Company scheme. It is not related to any average earnings calculation.
General
Personal
Stakeholder
Occupational or Company
AVCs
Annunities
State Pension Scheme
