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Additional Contributions
In addition to paying 6% contributions into the LGPS, you can pay Additional Voluntary Contributions (AVCs) into an AVC account with the Prudential. The AVC is linked to the LGPS and cannot be accessed until you receive your LGPS benefits.
The additional contributions are taken from your pay and paid into your own personal AVC account. You can pay up to 50% of your pay into your AVC fund. When you retire, your fund can be used to either:
- Buy an annuity with the LGPS
- Buy an annuity with the Prudential
- Buy an annuity on the open market
- Take up to 100% of the fund as tax free cash (HMRC restrictions apply)
New Prudential rules are coming into force from August 2012 which means that if you set up your AVC account and retire within 5 years of setting it up, there will be an exit penalty for having the AVC released to you at retirement.
The exit penalties are:-
| Year of withdrawal | Withdrawal during Year 1 | Withdrawal during Year 2 | Withdrawal during Year 3 | Withdrawal during Year 4 | Withdrawal during Year 5 | Withdrawal from Year 6 onwards |
| % of fund withdrawn | 15% | 10% | 8% | 6% | 5% | No charge |
Any AVC account which is set up and not accessed for 5 years or more, will not be subject to exit penalties.
If you are considering setting up an AVC account and you think you may be retiring within 5 years, you still have time to make sure you are not subject to the new exit penalties. You must ensure that your first additional voluntary contributions are received by the Prudential on or before 19th August 2012. In order to achieve this, you should make sure that the Prudential have received your completed AVC application form by 8th June 2012 at the latest.
To obtain an application form or for more information about AVCs, you can contact the Prudential helpline on 0845 607 0077
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