If you were a member of the LGPS on or after 1 April 2014 and you paid Additional Voluntary Contributions (AVCs) and the contract to pay those AVCs started before 1 April 2014, you will see some changes in how you can take your AVC plan.
When you take your AVC plan:
- you can now buy an 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, the 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 www.lgpsmember.org/more/AVCoptions.php
You can use an online calculator to find out the maximum AVC fund value that you could take as tax-free cash:
Maximum AVC calculator
At the point the pension team contact you with your retirement options - we will also include your AVC lump sum options in the same letter.
Important information:
In the LGPS there is generally no guaranteed investment return or guaranteed annuity rate on your AVC fund value upon retirement. Your AVC fund is a Defined Contribution (DC) pot that is invested, and its value can go up or down.
Please remember the value of your LGPS AVC fund can go down during the retirement process, or at any time it is invested. This is because the money in your AVC plan is invested in funds, and like all investments, its value is subject to market fluctuations.
- Your AVC is a form of investment, not a savings account with a guaranteed return. The value depends on how the chosen underlying investments (such as stocks, bonds, or property) perform in the market.
- The value of the fund can rise and fall in response to market conditions, economic news, or global events. The closer you are to retirement, the less time there is to recover from a market downturn.
- If your AVC fund is still invested during the period you are applying for and finalising your retirement benefits, its value can continue to fluctuate until it is actually paid out or used to purchase an annuity.
- The amount of pension an annuity provides depends on the value of your fund at the time you purchase it and prevailing annuity rates (which are affected by interest rates). If the market is down or interest rates are unfavourable when you buy an annuity, you might get a lower income.
- Remember, you have a choice of investment funds, which carry different levels of risk and potential performance. Our AVC provider offers a range of options, from higher-risk/higher-reward funds to lower-risk/more stable funds (such as "with-profits" or cash funds, which may have their own mechanisms like a Market Value Reduction).
