Demystifying the World of Additional Voluntary Contributions

At Pension Claims, we pride ourselves on simplifying complex pension-related concepts. In this blog post, we’ll break down the difference between FSAVCs and AVCs, two types of pension contributions that can help boost your retirement savings.

AVCs: Additional Voluntary Contributions Explained

AVC stands for “Additional Voluntary Contributions,” which are set up alongside a workplace pension scheme. These contributions allow employees to save extra money for their retirement by contributing an additional amount each month. AVCs can be linked to both defined contribution (DC) and defined benefit (DB) pension schemes.

Setting up an AVC with your employer means that the contributions will be deducted from your salary, along with your existing pension contributions. Keep in mind that your standard workplace contributions and AVCs may end up in different pots, depending on your employer’s arrangements.

When it comes to AVC pensions, it’s essential to ask the right questions and gather information about your pension provider, investment options, and charges. Your HR manager or your pension policy documents should have the answers you need.

Key Points about AVCs:

  • AVC pensions are defined contribution (DC) pensions.
  • You can start withdrawing money from your AVC pension after reaching 55 years old (57 from 2028), with 25% of your pot being tax-free, provided you’re also withdrawing from your main pension scheme.
  • Other options include exchanging your AVC fund for an annuity or making withdrawals at different times, subject to taxation.
Pensioners on a walk

FSAVCs: Free Standing Additional Voluntary Contributions Unveiled

FSAVC stands for “Free Standing Additional Voluntary Contribution Plan.” Similar to AVCs, FSAVCs are additional contributions made above your standard workplace pension contribution. However, the “Free Standing” aspect means that FSAVCs are not run by your employer and are managed by a provider of your choice.

What Happens to AVC Pensions After Death?

Both AVC and FSAVC plans allow you to nominate a beneficiary, who will receive the money in the event of your death.

Final Thoughts on AVCs and FSAVCs

Before considering AVC or FSAVC plans, ensure that you have an employee pension scheme in place. Workplace pension schemes should be your priority before exploring additional voluntary contribution options. If you need assistance with choosing a private pension plan, Pension Claims is here to help.

If you’re unsure whether you have an FSAVC or employer AVC, don’t worry. We receive daily inquiries about this topic and can help you determine the type of AVC you have and guide you to the next steps for advice.

If you're worried about your own investments and think you could benefit from expert advice, then I'm here to help.

Contact Greg Vaughan Financial Services