Some questions are continually raised with the Teachers’ Pension Scheme. These questions reveal much about how we use our pensions and what we are concerned about in our life. One of the most popular questions focuses on additional voluntary contributions. Pension companies often go into schools or teachers’ events to talk about AVCs and their benefits to you. Here we explore some of the details around AVCs and how you can find out if they are the right choice for you.
What are Additional Voluntary Contributions?
AVCs allow you to pay contributions to build up an additional fund for your retirement. These AVCs are not part of your Teachers’ Pension but an additional scheme administered by The Prudential.
Why choose an AVC?
The main reason to choose an AVC rather than set up a private pension is the available tax savings. You might have realised that your teacher pension might not offer the comfort you desire in retirement.
Choosing an AVC allows you to pay into another scheme, and it is taken from your salary before you pay tax. Consequently, it is a way to save money on your tax bill and prepare for your retirement. Consequently, a £100 investment in your AVC will only cost you £80, if you are a basic rate taxpayer.
Be aware there is a maximum amount of tax relief you can claim on your pension, so you need to explore this on the HM Revenue and Customs Website.
Additional Voluntary Contributions is another way to invest in your future. You will need more money in retirement than you think, and an AVC with Prudential is one way to do this. You can also explore flexibilities within the Teachers’ Pension Scheme itself. If you are unsure what is right for you, contact an independent financial advisor who can talk you through your options.
The content in this article was correct on 29th March 2022. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on pensions for teachers and non-teachers. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.