Additional Voluntary Contributions (AVCs)
Saving enough to live comfortably in retirement is important, but most of us have no idea how much we’ll need when we get there.
A core component of what we do at My Money Matters is salary sacrifice Shared Cost Additional Voluntary Contributions (Shared Cost AVCs), a lesser-known benefit available to employees within the Local Government Pension Scheme (LGPS) that helps them save more for retirement.
Many employees assume their state pension will be enough to provide a substantial income for retirement, but that’s rarely the case.
What are Shared Cost AVCs?
Shared Cost AVCs enable the employee to build an additional pot of money alongside their pension with contributions exempt from Income Tax and National Insurance contributions (NICs), with the potential to take it all as a tax-free lump sum when they retire.
The AVCs are held with the AVC provider (Standard Life, Prudential etc.) and are processed via a reduction in the employees salary via a salary sacrifice arrangement, on which the employer also makes savings by paying less employer NI.
Savings Example
With a Shared Cost AVC £100 only costs a basic rate taxpayer £72.08! That’s an immediate value increase of 38% before the money is even invested.
If an employee were to contribute the above in a Shared Cost AVC for 15 years, their pot could be worth £22,697.27 at a cost to them of only £12,974.40!
That’s a growth of over 74%*...
Investment Advice:
Empower your Employees with Expert Knowledge
To learn more see below:
Introducing Shared Cost AVC Investment Advice – the key to better financial wellbeing for your team!
My Money Matters have partnered with Westminster Wealth Management to offer your LGPS members regulated financial advice on their Shared Cost AVC investments at no cost to them.
Why is this crucial?
When making their Shared Cost AVC applications, many employees get stuck at the investment choice stage, and fearing the wrong decision, they choose the default fund or abandon their application completely.
The advice service provided by Westminster Wealth Management gives them specific recommendations on where they should consider investing their AVC funds from the choices available to them.
Already got AVC members?
This service can be used to benefit existing members too. Accessing FCA-regulated advice helps them review and adjust their investment choices according to their goals and risk tolerance.
How does it work?
During a Shared Cost AVC application, employees are made aware of this extra service. Data on income, spending, and retirement goals given by your employee guides personalised fund recommendations within your scheme’s fund choices
Employees can revisit the investment advice service at any time, for free.
“Introducing Shared Cost AVCs was the easiest benefits introduction decision I've ever made, they provide an excellent vehicle for colleagues wishing to enhance their retirement benefits and increase their options.”
James
“I think Shared Cost AVCs are the greatest benefit in Local Government, it has the potential to be the one scheme that keeps employees working in Local Government. It’s a ‘safe’ way to get more involved and have more of an active role in your finances.”
Andrew
Standard AVCs
We understand that not all employees may be eligible or willing to transition to your Shared Cost AVC scheme. This means your organisation may have members on both your standard AVC and your Shared Cost AVC scheme.
Standard AVCs provide employees with a valuable opportunity to save for retirement while enjoying Income Tax savings. Although AVCs do not offer the National Insurance savings provided by our Shared Cost AVCs, they still present a compelling benefit option.
*Figures are for illustrative purposes only. The figures shown are only estimates based on limited assumptions. The figures shown assume a net assumed growth rate of 3%. They do not include the impact of inflation and are not guaranteed or a personal recommendation. Basic rate savings are displayed as a guide only. Basic rate assumes an individual paying 20% Income Tax and 10% National Insurance contributions. The actual savings will depend on your personal circumstances and investment fund performance, which is invested by your Shared Cost AVC provider.
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