Your AVC options at retirement

If you have paid AVCs (Additional Voluntary Contributions) you need to decide what you would like to do with your AVC fund when you take your main LGPS pension.

The AVC options available to you under the LGPS rules will depend on:

• the value of your main LGPS pension benefits
• when you started paying into your AVC Fund

This page provides general information about the various options that may be available to you if you decide to take your AVC Fund alongside your LGPS pension benefits. Your specific options will be sent to you when you decide to take your main LGPS pension or at your request.

If you are taking your main LGPS pension benefits, you should read your AVC options letter in conjunction with your retirement pack.

Find out more about the process for retiring and taking your main LGPS pension benefits that you are currently paying into.

Find out more about putting a pension into payment that you are no longer paying into.

You can choose to use your AVC fund to buy an annuity outside of the LGPS. An annuity is a regular income payable for life. There are many annuity options. It’s really important that you shop around to get the best annuity rate based on your personal circumstances and the annuity features you are looking for.

Income from an annuity is subject to income tax which means it would be taxed in a similar way to your pension. The amount of tax you pay depends on your total income and your individual income tax allowance.

However, if you purchase an annuity, you will usually also have the option of being able to take 25% as a tax-free lump sum.

You may have the option of taking some or all of your AVC fund as a tax-free lump sum.

You can take up to 25% of your total pension pot as a tax free lump sum including your AVC Fund. You may even be able to take your entire AVC Fund as a tax-free lump sum if the value of your AVC Fund when added together with your LGPS lump sum is less than:

• 25% of your total pension pot, and
• 25% of the lifetime allowance

If you paid into the LGPS on or after 1 April 2014 and are currently paying in, when you come to take your pension, you will have the option of using some or all of your AVC fund to purchase extra pension in the LGPS (known as ‘top-up pension’).

The amount of extra pension you could buy with your AVC fund depends on:

• your age
• your state of health
• the value of your AVC fund at the time of payment

The extra pension will increase in line with the cost of living and will be subject to income tax along with the rest of your LGPS pension.

If you meet the criteria below, you may be able to use your AVC Fund to purchase extra final salary membership in the LGPS which will provide you with additional pension You will only be able to take this option if:

• you started paying into your AVC fund before 13 November 2001
• you are aged over 50
• you are in active service when you come to retire and take your pension, or you are retiring due to ill-health or flexible retirement
• you stopped paying AVC contributions before you take your pension

If you paid into your LGPS pension after 1 April 2014, you will have to take your AVC Fund at the same time as your main LGPS pension benefits.

If you stopped paying into your LGPS pension before 1 April 2014, you don’t have to take your AVC fund at the same time as your LGPS pension benefits. You can choose to leave your AVC fund invested and use it at a later date up until age 75.

If you leave your AVC fund invested this will give your pot a chance to grow, but as with any investment, the value of your fund could go up as well as down.

You should also note that if you choose not to take it at the same time as your LGPS pension benefits, you won’t have the same options as you would if you take it alongside your main LGPS benefits.

In addition to the options within the LGPS, you may also have the option of being able to transfer your AVC Fund outside of the LGPS, subject to meeting certain conditions. for more information, see: Transferring deferred benefits.

If you paid into the LGPS after 1 April 2014, you must do this before you put your LGPS pension benefits into payment.

If you have more than one AVC Fund, they would all need to be transferred at the same time.

More information about options outside of the LGPS can be found on Money Helper.

If you are thinking of transferring, it’s important you know the signs to avoid a pension scam. Find out how to avoid pension scams.

Before your AVC Fund can be released, we may need to check that you have received pension guidance from Pension Wise. Pension Wise is a free, impartial, government-backed service from Money Helper that helps people to understand their AVC options.

You can choose to opt out of receiving guidance from Pension Wise, but we need to confirm that you have chosen to do this.

Deciding how to use your AVC fund is one of the most important financial decisions you are likely to make. We recommend getting guidance or independent financial advice to help you with your decision.

Find out how to get help with your decisions about your pension.