Paying extra contributions

AVCs are long term savings that you can only take at retirement. They’re a flexible way to pay extra contributions because you can increase, decrease, stop or restart them at any time.

Like your standard contributions, AVCs come out of your wages before tax. So, if you are a 20% taxpayer and want to put £100 into your AVC pot each month, you only need to pay £80, as the remaining £20 will come from your tax relief.

You choose how much you want to pay into your AVC pot, and how to invest it with our provider, the Prudential. At retirement you then use it to:

• possibly take all of it as tax-free cash, or
• use it to increase your annual pension, or
• take some of it as tax-free cash and use the rest to increase your annual pension

If you start taking your pension before normal retirement age, both your main pension and any additional pension you have bought through AVCs will be reduced for early payment.

If you are setting up an AVC that is not a shared cost AVC, contact the Prudential: www.pru.co.uk/localgov or 0345 6000 343. Tell them you’re a member of the LGPS through the Clwyd Pension Fund and they will help you set up an AVC account linked to the pension you have with us.

If you die in service, your AVC pot will be payable to the beneficiaries on your expression of wish form as an additional death grant. If you have not completed an expression of wish, the death grant will go to your estate.

Some employers pay into your AVC pot with you if you take part in salary sacrifice; that is, an arrangement where your employer pays contributions on your behalf and you both save on national insurance.

This option is called a shared cost AVC. You will need to check with your employer to see if they offer shared cost AVCs, as they are set up differently. Your employer will explain what to do and how you start sacrificing some of your salary to set one up.

APCs allow you to buy an additional amount of annual pension in the LGPS. The most you can increase your pension by at retirement is currently £8,344 a year (2024/2025 figure). You can choose to buy the extra pension by making a one-off lump sum payment or by spreading the cost over a set number of complete years.

If you spread the cost, the APCs come out of your wages in the same way as your standard pension contributions, so any tax relief will apply to the APCs as well. If you decide to stop paying APCs before the end of the agreed contract, you will only receive the extra amount of pension you have actually paid for up to that point.

If you pay by making a one-off lump sum instead:

• You can have the extra contributions taken from your wages; or
• Make a payment directly to the Clwyd Pension Fund.

If you pay directly to the Fund, you will need to speak to HM Revenue & Customs to arrange for the relevant tax relief to be paid back to you, as the Clwyd Pension Fund cannot do this.

Any extra pension that you buy with APCs will be payable when you retire, with your annual pension, for life. If you start taking your pension before normal retirement age, both your main pension and the additional pension you have bought through APCs will be reduced for early payment.

APCs only increase your own pension. They do not increase the value of a partner’s pension if you die before them.

You can see how much you will need to pay in APCs to increase your pension by the amount you want using our online calculator. Just type in your details to get your quote:

APC Calculator

Before you can start paying APCs, you will need to get a medical certificate signed by your doctor, at your own expense, to confirm you are in reasonably good health.

Employers have the discretion to pay APCs with you, although not many do so. You will need to check with your employer if this is something they do.

If you are away from work long-term, you should speak to your employer or the Clwyd Pension Fund about how this will affect any extra contributions you are paying.

Older arrangements for paying extra contributions were in place before 1st April 2014:

• Added years, where you could buy extra membership; and
• Additional regular contributions (ARCs), where you could buy extra annual pension.

If you have either of these, we will still arrange for you to receive these benefits at retirement. But you cannot set up new added years or ARC arrangements.