In light of your 2024-2025 statement being available now, you might wonder whether you can pay a little more in to get a little more out. In the LGPS, there are 2 mechanisms that you can use to top up your pension. These are Additional Pension Contributions (APCs) or Additional Voluntary Contributions (AVCs). Whilst these might sound similar in name, they’re two very different things.
APCs
With APCs, you’ll be buying a guaranteed amount of additional pension in the LGPS which is added to your standard pension. There are pros and cons with these –
Advantages:
- You’re buying a guaranteed amount of pension, which increases in line with inflation
- If you’re forced to stop paying APCs as a result of retiring on Tier 1 or Tier 2 ill health, your APC contract will be deemed to have been paid up (and would be paid without early retirement reductions being applied)
Disadvantages:
- Can be expensive
- The cost of the contract can increase every few years (though you’ve the right to stop paying APCs and you’ll be awarded an amount of pension proportionate to what you’ve paid off)
- Your partner/eligible children wouldn’t be entitled to a proportion of the APC pension you’ve bought
- If you’re in the 50:50 section, you cannot set up an APC (unless it’s for repaying lost pension)
AVCs
AVCs are investment based funds. You're able to choose from a number of different types of investments with either Standard Life or Prudential, our chosen providers.
Just like with APCs, there are pros and cons with AVCs too:
Advantages:
- Flexible contribution rate - Can change contribution at any time
- AVCs can be used in a number of different ways at retirement; can be used to provide extra Scheme pension and/or a tax free lump sum (in some cases, up to the whole of your AVC pot can be used to provide tax free cash)
- If you choose to use your AVCs to provide extra Scheme pension, your partner/eligible children would, on your death, be entitled to 30.625% of the extra pension you’ve bought, too.
- You can set up an AVC even if you’re in the 50:50 section (unlike APCs)
Disadvantages:
- Value of pot can go up and down (depending on the ‘risk’ category they’re invested in, it’s possible that you could end up with an AVC fund that’s less than what you’ve paid in)
It really does come down to personal choice as to whether APCs or AVCs are the right option for you. Neither Capita nor the team at the EAPF can tell you what to go for.
There is lots of useful information about both options, including the process to follow to set these up in the Topping up my LGPS Pension factsheet.
Read more about topping up here.