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Additional Voluntary Contributions (AVCs) are designed for people who are members of a company pension scheme but who want to increase the contributions they make in order to boost their retirement income.

Average life expectancy is increasing so topping up a company pension with an AVC plan is a good way of helping fund the lifestyle you will want to enjoy in your retirement particularly as an AVC is very tax-efficient.

Just like your main pension contributions AVCs attract tax relief. If you are a basic rate taxpayer every £1,000 invested in your pension only costs you £800 because you will receive tax relief of £200. If you are a higher rate taxpayer it will only cost you £600 because you will receive £400 in tax relief.

You are also allowed to take up to 25% of your fund as tax-free cash when you retire. However although you get tax relief on your contributions to your pension fund and to AVCs do remember that any subsequent payment from your pension fund will be taxed as earned income.

Note too that as well as making voluntary additional payments into your company pension you can also make separate “freestanding” additional voluntary contributions which are not linked to your company scheme.

If you would like further information on Additional Voluntary Contributions or Freestanding Additional Voluntary Contributions contact James Green & Co who will introduce you to licensed financial advisors who can discuss your personal circumstances with you.

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