ADDITIONAL VOLUNTARY CONTRIBUTION (AVC) CHOICES
NHS PENSION SCHEME
This information is for:
Members of the NHS Pension Scheme
Those members who wish to purchase additional pensionable service in the NHS Pension Scheme
Members of the NHS scheme can increase their retirement benefits by paying Additional Voluntary Contributions (AVCs).
Purchasing additional membership (Added Years)
Additional Voluntary Contributions can be paid on a monthly basis to purchase additional years and days service in the NHS Scheme.
The maximum AVC contribution you can make is 9% of your pensionable salary. This contribution is in addition to your normal Scheme contribution of 6%. You can begin to pay by deduction of AVCs from any future birthday.
Your Added Years AVC contributions are deducted from your salary each month through the PAYE system and you receive full and immediate tax relief on these contributions at the highest rate of Income Tax for which you are liable, provided that the amount of your income that is subject to that rate is at least as much as the gross amount of AVC.
If you wish to purchase additional service by the payment of monthly Added Years AVCs and your birthday is imminent, please ensure that you allow sufficient time for the quotation and setting up process to be followed.
The current facility to purchase added years will be removed when the new arrangements take effect in April 2008. The transition will take account of the fact that added years contracts can only be taken out from a member’s birth date and the intention will be to give members as much notice of the withdrawal of the added years facility as is feasible before the date when the revised Scheme takes effect. Existing added year contracts taken out before the facility is removed will be honoured to buy service in accordance with the current terms.
Any new added year applications must be notified as an expression of interest to UCL Pension Team by 31 March 2008 at the latest.
Further information of these changes will be outlined in the document “The NHS Pension Scheme is changing” which is being distributed to all NHS members during November 2007.
Money Purchase AVC Arrangements through the NHS
A Money Purchase arrangement allows you to make additional contributions to build up a fund. These contributions are invested and the returns from those investments increase your cash fund.
With effect from 6 April 2006 (A-day) the NHS Scheme regulations were changed and revised as follows:
To allow members to contribute more into a Money Purchase AVC fund. You may now pay Money Purchase AVC contributions up to the equivalent of your annual pensionable salary, less any other contributions paid to the NHS scheme or any other pension arrangement.
To allow members who have a Money Purchase AVC arrangement linked to the NHS Pension Scheme to take 25% of that fund as a lump sum. With effect from 1 April 2008, this is being revised. You will be able to take 25% of the total value of your pension benefits can be taken as a lump sum.
Money Purchase AVC contribution arrangements are deducted from your salary each month through the PAYE system and you receive full and immediate tax relief on these contributions at the highest rate of Income Tax for which you are liable, provided that the amount of your income that is subject to that rate is at least as much as the gross amount of AVC.
These monthly Money Purchase AVC arrangements may be commenced in any month as they are not dependent on the month of your birthday.
You may also, at the end of the tax year, consider making a Lump Sum payment into your Money Purchase AVC fund. This option is available to all NHS members regardless of whether you are currently making monthly AVC contributions (Added Years or Money Purchase).
If you wish to commence payment of a Money Purchase AVC arrangement through the NHS, either as a monthly arrangement or a Lump Sum payment you need to follow this procedure:
Decide which provider (Prudential / Standard Life) you wish to invest your contributions with, and contact them (details below).
You will be asked by them to complete their application form, and return it to them.
Once they have processed your application form and set up an account for you, they will then pass your instruction to UCL for processing.
UCL will contact you to arrange and collect payment.
All Lump Sum AVC payment requests and decisions need to be made by 31 January 2008 in order to allow sufficient time for the AVC (Prudential or Standard Life) provider and UCL to processing your instruction through the UCL last payroll (March 2008) in the current tax year.
You will be entitled to tax relief, through the PAYE system, on the lump sum payment, although the gross amount is paid into the Money Purchase fund.
Please note it is not permissible to make a Lump Sum payment into the Added Years AVC arrangement.
Information on the Money Purchase AVC providers and how to contact
The NHS Scheme has Money Purchase AVC arrangements administered by the Prudential and Standard Life. Their contact details are as follows:
Prudential: Telephone number: 0845 070 2456
Standard Life: Telephone number: 0800 333 306
It will be helpful to have your National Insurance Number to hand when contacting the provider.
Further options / flexibility to consider
You may already be paying the maximum contribution amount of 9% into the Added Years AVC monthly arrangement but wish to make further contributions relating to these new limits. You have the scope to pay further amounts into the NHS Money Purchase AVC arrangements with the Prudential and/or the Standard Life on a monthly basis. You may wish to make monthly contributions with a combination of both types (Added Years, Money Purchase) of AVC arrangements.
High Levels of Contributions
Tax relief is limited to the amount of tax you have paid in the current tax year. This is particularly relevant if you are considering high contribution levels or a lump sum payment. It is the decision of the individual, in consideration of their personal circumstance as to whether this is the most tax efficient thing to do, and to bear in mind the limits placed on contributions by the Annual Allowance The Annual Allowance set by HMRC for the tax year 2007-2008 is £225,000.00 and rises to £235,000.00 for the following tax year.
Special Conditions / Restrictions
It should be noted that, in some cases, your NHS membership may impose special conditions or contribution restrictions. All quotations provided by the UCL Pension Team will be subject to final verification by NHS Pensions.
The AVC arrangements offered by the NHS Scheme are only one way of providing extra retirement benefits. There are other forms of saving for retirement available to individuals and you may wish to consider these before deciding to contribute to the NHS AVC options. You should not look upon this document as financial advice or a recommendation of a particular course of action. You should consider your own circumstances fully, and may wish to consult a Financial Adviser to help you make a decision. It is against the law for NHS Pensions or an NHS employer to give financial advice.
You can obtain further information on the NHS Scheme, the benefits it provides, the AVC options available and the revisions to the Regulations since April 2006 at the following links:
Obtaining a quotation
if you wish to obtain a written quotation on a monthly added years AVC arrangement, or wish to make a lump sum payment to a Money Purchase arrangement or need further information on the payment of NHS AVCs, contact the UCL Pensions Team. Contact details available at http://www.ucl.ac.uk/hr/staff/hr_staff_contacts.php
It will be helpful if you provide your full name and employee number (found on your payslip), as this will assist the team in quickly and easily identifying you.
Alternatively, you may make your request in writing, addressed to your contact as above, or by visiting Payroll and Pension Services during the opening hours of 10 am to 4 pm.