You can make extra pension contributions, through an additional voluntary contribution (AVC) arrangement.
When you take your pension from the SFHA Pension Scheme, the value of your AVC fund is also converted into a pension.
Your AVCs can be invested in one of two funds of your choice - both provided by The Pensions Trust:
| the Growth Plan |
Or |
the Unitised Ethical Plan |
If you would like more information on the funds The Money Purchase Booklet provides full details. Click here to access the Money Purchase Booklet.
Alternatively, you may pay AVCs privately as Free Standing AVCs (FSAVCs) to another pensions provider.
Should I pay AVCs?
Firstly, remember that currently AVCs are for the provision of extra pension benefits only - although since April 2006 AVCs are simply included in your Lifetime Allowance and therefore any distinction between standard scheme contributions and AVCs has largely disappeared.
You should always consider your needs and the savings options, including the option of a concurrent personal pension scheme or an additional Stakeholder pension plan, best suited to your own circumstances. You may wish to discuss all options available with your financial adviser. The Pensions Trust can not give financial advice.
You may choose to pay AVCs to increase your pension because:
- you may want your pension to start before normal pension age; or
- you may not have enough pensionable service; for example, you may have had a gap in your employment or previous employers may not have provided a pension scheme.
Full tax relief is given on AVCs and to take advantage of this please consider what you can afford to pay.
The Pensions Trust cannot give financial planning advice and the decision to pay AVCs is the member’s responsibility.
How much can I pay?
You can now pay up to 100% of your taxable pay/benefits in any tax year, up to an 'Annual Allowance' (see below). This limit includes:
Your ‘normal’ Scheme contributions + any AVCs you pay to the Scheme + any Free Standing AVCs (FSAVCs) or contributions to other pension arrangements.
Are there any restrictions?
As long as the total increase in benefits in any one year does not exceed the annual allowance, you will receive tax relief on up to 100% of your earnings. For example, if your normal contribution rate (to the scheme) is 7.7%, you will have scope to pay up to a further 92.3% of your earnings as tax-free AVCs.
If your contributions exceed 100% of earnings in any tax year, tax on the excess, at your marginal rate, is payable through self-assessment.
The annual allowance is set as follows:
2008/09 £235,000
2009/10 £245,000
2010/11 £255,000
It is expected that the annual allowance will eventually increase in line with inflation.
How do I pay AVCs To The Pensions Trust?
If you would like to pay monthly AVCs to The Pensions Trust complete an AVC application form and hand it in to your payroll department. Click here for the relevant form to download
AVCs paid monthly to The Pensions Trust will be deducted from your salary in the same way as your ‘normal’ contributions, thereby gaining tax relief immediately. AVCs are usually a percentage of your salary and can be stopped, started, increased and decreased on request.
If you prefer, you can pay your AVCs as a lump sum instead of regular monthly payments. Lump sum payments must be made via your employer's payroll so please make arrangements with your HR or payroll officer in plenty of time. The Pensions Trust can no longer accept personal cheques due to the requirements of money laundering regulations.
Need More Information?
Click here to download the full Additional Voluntary Contributions Booklet.