Below is some information which may help you decide between buying extra membership and AVC's. There are, of course, advantages and disadvantages to both facilities so please ensure you read all the information carefully.
Buying Extra Membership |
Advantages
- The extra benefits that you buy are treated as additional service in the Local Government Scheme. Therefore, you automatically receive extra pension and a higher lump sum based on the same calculation as your normal Local Government service.
- Your benefits are guaranteed, and they do not depend on the 'ups and downs' of investments.
- If you don't finish paying because you retire for health reasons or you die, we will still count all the membership you agreed to buy.
- There are no charges or fees.
| Disadvantages
- Because of the built in ill health and death protection, you do need a health check.
- The benefits are a fixed package and you only have limited choice over how to draw them.
- What's more, the package includes dependants' pensions, so you could be paying for something you don't need, for example if you are single with no children.
- You can only pay by a set percentage of your pay.
- You may have less scope than with AVCs, because your contributions are not based on taxable pay.
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Paying AVCs |
Advantages
- AVCs are quite flexible, and you can easily change, take a break, or stop your payments at any time.
- You can choose to pay a set percentage of your pay, a fixed amount, or even a one off payment.
- You don't need a health check (unless you also take out additional death benefits).
- You can draw your AVCs as a separate pension through an insurance company or through the Scheme or you may be able to take some or all of your accumulated fund as a tax free lump sum (restrictions apply).
- If you choose the separate pension, you are free to choose the package you want, for example a pension just for you, with no dependants' pensions.
- You may have more scope to pay AVCs, because your contributions are based on taxable pay.
| Disadvantages
- AVCs are a form of investment, and you have no idea how much pension you will get until you draw it. Although Prudential has a good track record, you can't guarantee what the future will hold.
- If you draw your AVCs as a separate pension through an insurance company, how much you will get depends on pension rates at the time, and these are impossible to predict.
- Like other investments, you do have to pay administrative charges, both as you build up the AVC pot and on the pension you draw.
- If you have to retire early for health reasons or you die, the benefits will only be based on the AVC pot you have built up.
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Free-standing AVCs
This section only covers our in house AVC with Prudential. Many other financial services companies also offer AVCs - these are known as free-standing AVCs (FSAVCs). They are similar in many ways, but they are run completely independently of both your employer and this Fund. Therefore the charges are likely to be much higher, and this could affect overall performance.
If you have an FSAVC, you are free to transfer it into our Prudential AVC at any time.
Stakeholder or personal pensions
You may, if you wish, top up your benefits by paying into a personal pension or stakeholder pension at the same time as paying into the Local Government Scheme. You can invest up to 100% of your total taxable earnings in any one tax year (or £3,600 if greater) into any number of concurrent pensions arrangements of your choice. But as we cannot offer a personal or stakeholder pension, you will have to make your own arrangements, if you are interested in one of these.
Other points to consider
You should think of anything you do to top up your pension as a long term arrangement. So if you are unable to commit yourself to save over a long period or you want more flexibility, you might be better with other savings or investment schemes.
You may pay tax on the extra income from topping up your benefits. So if you are looking at any other form of saving or investment, make sure you ask about the tax on it too.
For general advice on savings and investments, you may want to get in touch with an independent financial adviser. And finally, please remember that with any savings or investment plan, you get what you pay for. So if you only pay a little in, you can only expect a little out. | 
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