If you are paying AVCs arranged through the Local Government Pension Scheme (LGPS) in-house AVCs, your contributions will cease when you leave. They will cease 2 days before age 75 if you carry on in work beyond that age.
They are paid when you retire or may be able to be transferred to another pension provider or deferred up to age 75.
Here are the different ways you can use your in-house AVC Fund when you retire:
Buy an Annuity
This is where an insurance company, bank or building society of your choice takes the value of your AVC Fund and pays you a annuity in return.
If you started your AVC contract before 1 April 2014 you can do this at the same time as you take your LGPS benefits or you can choose to delay payment until any time up to the eve of your 75th birthday.
If you started your AVC contract from 1 April 2014 you must do this at the same time as you take your LGPS benefits.
An annuity is paid completely separately to your LGPS benefits.
The amount of annuity depends on several factors, such as interest rates and your age. You also have some choice over the type of annuity, for example whether you want a flat rate pension or one that increases each year, and whether you also want to provide for dependants' benefits.
Annuities are subject to annuity rates which in turn are affected by interest rates. When interest rates rise, the organisation selling annuities is able to obtain a greater income from each pound in your AVC fund, and therefore can provide a higher pension. A fall in interest rates reduces the pension which can be purchased.
Buy a Top-up LGPS Pension
If you retire with immediate payment of your benefits you may be able to use some or all of your AVC fund to buy a top-up pension from the LGPS. This automatically provides inflation proofed pension and dependants' benefits and is based on set purchase factors which do not tend to change.
Buy extra membership in the LGPS
If your election to start paying AVCs was made before 13 November 2001 you may be able in certain circumstances, such as retirement on ill health grounds or on ceasing payment of your AVCs before retirement, to convert your AVC fund into extra LGPS membership in order to increase your LGPS benefits.
Take your AVCs as cash
You can choose to take some or, in some circumstances, all of your AVC benefits as a tax-free lump sum.