width="138"><SPAN class="ARTICLEMENUHEAD">C O N T E N T<br><SPAN CLASS=ARTICLEMENULINE>_______________ </SPAN><br><SPAN CLASS=ARTICLEMENUITEM><A HREF=#1 target=_self>AVC Charges </A></SPAN><br><SPAN CLASS=ARTICLEMENUITEM><A HREF=#2 target=_self>Free-Standing AVCs </A></SPAN><br><SPAN CLASS=ARTICLEMENUITEM><A HREF=#3 target=_self>AVC Pension at Retirement </A></SPAN></SPAN><p><SPAN CLASS=GLOSSARYHEAD><A HREF=money:navigate/guide/guide/222001/12>G L O S S A R Y</SPAN><BR><SPAN CLASS=SIDEBARLINE>______________</SPAN><BR><SPAN CLASS=GLOSSARYWORD>AVCs</SPAN></A></p><SPAN CLASS=ADVISORCELL><p><SPAN CLASS=FYI>Expert</SPAN><BR><SPAN CLASS=ADVISOR>A s s i s t a n t<BR> </SPAN><BR><SPAN CLASS=ADVISORTEXT>
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personal finance journalist, contributor to the Saturday Telegraph and Money Mail, and personal finance editor of Saga magazine</SPAN><BR></SPAN>
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</FONT>You can boost your pension with Additional Voluntary Contributions (AVCs). All active members of occupational pension schemes must be allowed to pay AVCs to improve their pension benefits. If your employer does not operate a pension scheme for employees, he cannot set up an AVC for you.<BR>
The Inland Revenue puts a limit on the amount you can save tax-free for your pension and the benefits you can receive. Your total contributions to your pension must not be more than 15 per cent of your salary; the Inland Revenue also places limits on the absolute amount that you can put into a pension fund (see also <SPAN CLASS=ArtikelLink><A HREF="money:navigate/guide/guide/001007.html">Tax and Pensions</A></SPAN>). Even so, the earnings cap is quite high, and most of us have the scope to build up a bigger pension by paying AVCs. Find out what percentage of your salary you currently contribute to your pension fund, and pay as much as you can afford up to the 15 per cent limit into an AVC scheme. For example, if you pay 5 per cent of your salary each month into a pension, you have up to 10 per cent to put into AVCs. Tell your employer how much of this you want to pay in AVCs. Most schemes allow you to make one lump sum investment or contribute monthly through your pay packet.</P>
<B></SPAN></td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self><SPAN CLASS=SIDEBARHEADS><SPAN CLASS=ARROW>ß<!--up arrow--></SPAN> B A C K </SPAN><BR><SPAN CLASS=SIDEBARLINE>_____________ </SPAN><BR><SPAN CLASS=SIDEBARLINK>to the top </A></SPAN></td></tr></table></td><td align=left valign=top><SPAN CLASS=ARTICLE><p><SPAN CLASS=ARTICLESUBHEADS><a name=1>AVC Charges</a></B></SPAN><br>Normally, your employer absorbs the management charges involved in setting up an AVC with a pension provider, so it can be a cheap way of saving extra for retirement. But if for any reason you do not want to invest through your employer's scheme, you can go it alone through free-standing AVCs.</P>
<B></SPAN></td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self><SPAN CLASS=SIDEBARHEADS><SPAN CLASS=ARROW>ß<!--up arrow--></SPAN> B A C K </SPAN><BR><SPAN CLASS=SIDEBARLINE>_____________ </SPAN><BR><SPAN CLASS=SIDEBARLINK>to the top </A></SPAN><p><SPAN CLASS=GLOSSARYHEAD><A HREF=money:navigate/guide/guide/222001/47>G L O S S A R Y</SPAN><BR><SPAN CLASS=SIDEBARLINE>______________</SPAN><BR><SPAN CLASS=GLOSSARYWORD>FSAVCs</SPAN></A></p></td></tr></table></td><td align=left valign=top><SPAN CLASS=ARTICLE><p><SPAN CLASS=ARTICLESUBHEADS><a name=2>Free-Standing AVCs</a></B></SPAN><br>The law allows you to set up free-standing AVCs (FSAVCs) through a pension company of your own choice, in addition to your occupational scheme and any AVC you have with your employer.<BR>
You can make AVCs through your employer and FSAVCs independently in the same tax year, as long as the total of all your pension contributions is not more than 15 per cent of your salary. But the rules can get complicated as you also have to keep within the limits of the benefits the pensions will bring. These limits are calculated according to the legislation in place at the time you joined the pension scheme or started making AVCs.</SPAN></td></tr><tr><td align=center valign=top><TABLE CELLSPACING=0 CELLPADDING=0 WIDTH=138 BORDER=0><TR VALIGN=TOP><TD valign=top align=right WIDTH=138><SPAN CLASS=GLOSSARYHEAD><A HREF=money:navigate/guide/guide/222001/78>G L O S S A R Y</SPAN><BR><SPAN CLASS=SIDEBARLINE>______________</SPAN><BR><SPAN CLASS=GLOSSARYWORD>MIRAS</SPAN></A></TD></TR></TABLE></td><td align=left valign=top><SPAN CLASS=ARTICLE>
You pay FSAVCs net of basic rate tax direct to the scheme administrator and he claims the difference from the Inland Revenue. Mortgage Interest Tax Relief at Source (MIRAS) tax relief on mortgages works in much the same way. You also have to pay any commission or up-front management fees and annual charges to administer the fund, so it can be expensive. But if the fund performs well, it is worth the extra cost.<BR>
You do not have to stick with the same FSAVC provider each year. You can shop around and build up a portfolio of funds, or play one off against the other until you get a good deal on charges.</P>
<B></SPAN></td></tr><tr><td align=center valign=top><table border=0 cellpadding=0 cellspacing=0 width=138><tr><td align=right valign=top width=138><A HREF=#top TARGET=_self><SPAN CLASS=SIDEBARHEADS><SPAN CLASS=ARROW>ß<!--up arrow--></SPAN> B A C K </SPAN><BR><SPAN CLASS=SIDEBARLINE>_____________ </SPAN><BR><SPAN CLASS=SIDEBARLINK>to the top </A></SPAN></td></tr></table></td><td align=left valign=top><SPAN CLASS=ARTICLE><p><SPAN CLASS=ARTICLESUBHEADS><a name=3>AVC Pension at Retirement</a></B></SPAN><br>If you started paying AVCs for the first time after 7 April 1987, they can only buy extra pension (or death benefits). You cannot convert them into a tax-free lump sum.</P><P><SPAN CLASS=NEXTSTEPS>N E X T T O P I C</SPAN><SPAN CLASS=NEXTSTEPSLINK><BR><A HREF=money:navigate/guide/guide/006008>Contribution Holidays</A></SPAN></p><p><SPAN CLASS=MSNtext>To access further financial articles, have a look at<br><Spann Class=MSNLink>MoneyManager on MSN!</SPAN><br><SPAN CLASS=MSNlogo><a href=http://MoneyManager.uk.msn.com><img src=msn_logo.gif border=0 align=top></a></SPAN><br> </SPAN></p><p><SPAN CLASS=CREDITS>Copyright 1997 Microsoft Corp.</SPAN></p></td>
