Additional Voluntary Contributions (AVCs) for teachers are a means of boosting your financial health in retirement. As the name suggests, these are additional payments you may wish to contribute voluntarily to your retirement fund. It is a good idea to think carefully about AVCs alongside your retirement goals. Retirement goals include when you hope to retire and what you hope to do when you retire. Some questions to ask:
- Do you want to retire early?
- Do you want to continue working after you retire, with additional service?
- Do you want to travel and pursue interests when you retire?
- How much would help you feel financially comfortable when you leave work?
Putting you in control
Subject to the level of contributions accrued whilst paying into an AVC, it is possible if you are looking to retire early, that you could live off the Teachers’ AVC fund until you are old enough to take your main teacher’s pension without risk of reduction. This may be especially important now that the NPA (normal pension age) has increased and CARE pension ages are linked to state pension ages.
It is also possible at the end of your career that you would want a reduction in responsibility. You may even want to work part-time as you come to the last stages of teaching. It is an exhausting career, and it is fair to consider reducing the work-load and the pace. Your AVC fund could be used to supplement your income, making your working day more bearable.
An AVC typically becomes available at the normal minimum pension age, which is currently 55. However, you should seek advice on this from your financial professional.
In short, AVCs offer you a choice at the end of your career that you might not otherwise enjoy.
AVCs equals Tax Savings
AVCs continue to be a means of making savings for your retirement that also offer tax savings. The contributions are removed from your salary before your income tax is calculated. This means that you pay less tax than you would have done. A monthly voluntary contribution of £150 could save you £30 based on basic rate tax. Be aware that tax rules can change, and you should seek advice on the implications of taxation when choosing AVCs.
In short
Additional Voluntary Contributions are a tax-efficient means of paying forward into your retirement. You can take your disposable income now and save it for a time when you might not want to, or feel you can, work.
There are other options for increasing your retirement benefits, which you can discover by looking on the Teachers’ Pension Scheme website or by speaking to a financial advisor.
The content in this article was correct on 14th January 2018. You should not rely on this article to make important financial decisions. Teachers Financial Planning offers advice on additional voluntary contributions. Please use the contact form below to arrange an informal chat with an advisor and see how we can help you.
