Increasing your pension

You can pay additional pension contributions to the in-house AVC scheme as run by The Prudential Assurance Company.

You can pay a monthly contribution and choose how you would like your contributions to be invested.

AVCs are invested separately from the main LGPS Fund and a number of investment opportunities are available to you.

AVCs are deducted through payroll and you therefore receive tax relief automatically on the contributions you pay at your marginal rate. This means that your LGPS contributions and your AVCs are deducted from your gross pay before income tax is calculated.

Deductions commence from the next available payday following your election to pay AVCs and you can vary or cease payment at any time whilst you are contributing to the LGPS. If you leave local government employment and transfer your LGPS benefits to another scheme you can also normally transfer your AVC fund as well.

• You can pay up to 100% of monthly pensionable pay into your AVC fund
• AVCs are deducted from your monthly pensionable pay either as a percentage or a monetary amount. If you pay contributions as a percentage your deduction will also be based on any voluntary overtime that you work
• If you are paying AVCs and leave with an entitlement to deferred benefit you can transfer in and buy additional annual pension from the LGPS when taking payment of benefits
• Your AVC must be paid at the same time as claiming your LGPS retirement benefits
• If death occurs before receiving payment of your deferred AVC Fund, the Pension Fund has absolute discretion over who receives the amount payable.  (We will, of course, consider any Expression of Wish held).

At retirement you will have a number of options available to you:

• You could take up to 100% of your AVC pot as a tax-free cash lump sum when you take your AVC benefits at the same time as your LGPS pension (as long as the total lump sum you take isn’t more than 25% of the total value of your LGPS benefits taken)
• Use your AVC Fund to buy an annuity from an insurance company, bank or building society of your choice (although you can defer purchasing an annuity until, at the latest, the eve of your 75th birthday)
• Buy an additional amount of pension within the LGPS
• If you started paying your AVC before 13 November 2001 you can, in certain circumstances, even transfer your AVC Fund into the LGPS to buy additional LGPS membership

You can an online calculator to find out the maximum AVC fund value that you could take as tax-free cash.

Changes to pre-April 2014 AVC contracts

If you are a member of the LGPS who is or was, paying AVCs and the contract to pay those AVCs started before 1 April 2014, you will see some changes to the way your AVCs are calculated and how you can take your AVC plan.  

If you are currently paying AVCs:

• you can now pay up to 100% (rather than 50%) of your pensionable pay into your AVC plan
• AVCs will now also be deducted from any voluntary overtime you work (if you pay AVCs as a percentage of your salary).

When you take your AVC plan

• if you leave the scheme with a deferred benefit you can now buy additional pension from the LGPS with your AVC plan when you take your benefits from the scheme. Before the change, this option was only available to members who took immediate payment of their main scheme benefits and their AVC plan when they left the scheme
• when you take your main scheme benefits you will no longer be able to leave your AVC invested and take it later
• if you die before taking your AVC and a lump sum is to be paid from your AVC plan your pension fund now has absolute discretion over who to pay that sum to (rather than it having to be paid to your estate). If the lump sum is paid at the discretion of the pension fund it does not form part of the estate and will not be subject to inheritance tax

For information about the other ways you can use your AVC plan see the national LGPS website 

Find out more

You can access the online service at https://www.pru.co.uk/online

For general AVC enquiries please visit https://www.pru.co.uk/rz/localgov/

Some points to consider

An annuity is an amount of additional pension benefit. If you choose to purchase an annuity via the Prudential we would contact the Prudential and arrange for them, along with their third party provider, HUB Financial Solutions, to contact you with details of the Annuity Pension options they are able to offer you. Of course, you can instead choose to independently find your own open market annuity provider. You can choose the type of pension that best suits your needs e.g. a flat-rate pension for yourself or one that increases each year, or perhaps a pension that will include a survivor's pension for your spouse or partner in the event of your death.

Annuities are subject to annuity rates that in turn are affected by interest rates.

You may be able to take 100% of your AVC Fund without incurring a tax charge subject to HM Revenue & Customs limits.

If you have previously contributed to a free-standing AVC plan you may be able to transfer the accumulated FSAVC Fund into your in-house AVC Fund or even into the LGPS.

Important Changes to Prudential Local Government AVC Exit Charges

In December 2016 the DWP released new regulations regarding the level of exit charge allowable to members over the age of 55. As a result, the exit charges should change as follows:

• If you commenced an AVC from 1 October 2017 and you are over age 55, no exit charge can be applied to your AVC fund. For existing members over the age of 55 the exit charge is capped at 1%

Under current regulations, an exit charge is applied to members who take their benefits within the first three years of making their contribution to their AVC. From 19 March 2017, this regulation changed as follows:

• Members whose first contribution is received on, or after, 19 March 2017 will no longer be subject to an exit charge regardless of age
• Members whose first contribution is received prior to 19 March 2017 will have their exit charge capped at 1% for the first 3 years and 0% thereafter regardless of age