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The Superannuation Arrangements of the University of London |
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Changes to AVCs from 1 April 2012: Frequently Asked Questions Currently active members of SAUL can make Additional Voluntary Contributions (AVCs) to buy extra Pensionable Service. From April 2012 this will be replaced by a new way for members to build up extra benefits – called Additional Pension. Lump-sum AVCs and monthly AVC contracts for between three and 10 years will be available, which will buy extra pension instead of Pensionable Service. If you have a question about the new way to build up benefits with AVCs which isn't covered here, please complete our feedback form. We'll answer your question and publish it here to help other members. |
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How is the way that AVCs are paid changing? Are there limits to the amount of AVCs I can pay? Is it better for me to take an AVC contract out now to buy Pensionable Service? I’m currently paying AVCs – will I be affected?
Additional Voluntary Contributions (AVCs) are extra payments active members can make to increase their benefits in SAUL. These extra contributions can be paid as a lump sum or through a monthly contract. AVCs are deducted from pay before your tax is calculated so less tax is paid.
Currently AVCs build up additional Pensionable Service in SAUL. When a member leaves or retires the extra Pensionable Service is included in the calculation of a member’s benefits. You can see how monthly AVCs currently work by visiting our AVC calculator. From 1 April 2012 AVCs will build up Additional Pension. This means that when a member pays AVCs they will buy a fixed amount of pension. Members can buy up to 21 units of pension. At Normal Pension Date each unit is worth a pension of £250 a year (payable for life) and a lump sum of £750. Once a pension is paid the units purchased will increase in the same way as the rest of your pension. You can see how AVCs will work from 1 April 2012 by visiting our Additional Pension calculator.
How is the way that AVCs are paid changing? You can make lump sum payments to buy Pensionable Service until 31 March 2012 and to buy Additional Pension from 1 April 2012. The deadline for receipt of lump sum AVC applications is Wednesday 29 February 2012. Please ensure that all applications are with us prior to this date, otherwise we cannot guarantee that they will be processed in time. Currently, monthly AVCs contributions are based upon a percentage of Salary which is paid until either age 60 or 65. This means when Salary increases during the contract, the AVCs paid increase too. From 1 April 2012, AVCs paid will be a fixed amount throughout the contract. If your Salary changes the AVCs paid each month will stay the same. Contracts are available from 3 -10 years.
Are there limits to the amount of AVCs I can pay? Currently you can pay up to 10% of Salary in AVCs either as lump sum or as part of a monthly contract. From 1 April 2012 you can pay up to 100% of Salary into SAUL – including your normal contributions, AVCs for extra Pensionable Service and Additional Pension. The maximum amount of Additional Pension that can be bought during your membership is 21 units.
Is it better for me to take an AVC contract out before 1 April 2012 to buy Pensionable Service? We can’t say whether you should pay AVCs or which is the best option - it depends on your circumstances. You might want to think about these things…. If you buy extra Pensionable Service (available at the moment):
If you buy Additional Pension (available from 1 April 2012):
I’m currently paying AVCs – will I be affected? If you currently have an AVC contract to buy additional Pensionable Service you can continue your payments until the end of the contract. You can stop the contract or reduce your payments but you cannot increase them. If you wish you can pay AVCs to buy Additional Pension too. |
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