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It’s never too soon or too late to think about the difference you could make to your lifestyle later in life. In addition to your teachers’ pension scheme, Additional Voluntary Contributions (AVCs) could be just the thing to help your retirement pot go further.

Watch the videos to find out how AVCs could help you. We cover the basics and all the important details too. AVCs are investments so the value can go down as well as up and you may get back less than you put in.

Understanding your AVC

What's an AVC?

An Additional Voluntary Contribution, or AVC, is a way to save money for your retirement in addition to your main scheme pension. It could help you to retire early or with more money.

AVCs are invested in funds, so they have the potential to grow over time. It also means the value can go down as well as up and you may get back less than you put in.

If you’re a taxpayer, you get valuable tax savings on your contributions, as your employer takes them from your pay before its taxed. The tax you pay depends on your individual circumstances, and tax rules may change in the future.

They’re easy to apply for and flexible. You can pay into an AVC regularly or pay a specific amount, and you can change your contributions at any time.

With AVCs you have a number of options for how to access your savings, currently from age 55, on retirement, or earlier if you’re in ill health.

Prudential have helped thousands of employees like you to use AVCs to save for their retirement.

We‘re a trusted provider, working in partnership with your main scheme to provide AVCs.

A quick introduction to AVCs and how they work

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AVCs and tax savings

One of the reasons you might choose to save for your retirement with AVCs, alongside your main scheme pension, is the tax savings they offer.

If you’re a taxpayer, any regular contributions made into an AVC pot are taken from your salary before tax. This means they cost you less from your take home pay than you might expect.

For example, as a basic rate taxpayer, if you pay in £100, the cost to you will only be £80. This is because the money you would normally pay as tax goes straight into your AVC instead.

And it’s exactly the same if you’re a higher rate taxpayer, because your £100 contribution will only cost you £60. The tax you pay depends on your individual circumstances, and tax rules may change in the future.

The impact of tax savings on your AVC

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How AVCs could help you

Not only are AVCs a smart way to save for your future, they can give you several options for how and when you retire.

As your AVC is invested, it has the potential to grow. But remember, the value can do down as well as up and you may get back less than you put in.

With an AVC you might be able to retire early, so you could spend more time enjoying the things you like.

Or you could still retire on your planned retirement date, but potentially with more money.

Or if you’d like to reduce your hours or start working flexibly, you may be able to use your AVC, currently from age 55, to supplement your salary if your scheme allows you to.

How AVCs could fit into your plans for the future

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Flexible paying in, flexible paying out

Lots of people’s circumstances change over time, so flexibility is important when it comes to saving for the future.

AVCs are separate to your main scheme pension. They give you more flexibility both when you’re saving, and when you want to access your money. This is because you don’t have to take your AVC at the same time as your main scheme pension benefits.

You can make regular or lump sum payments into your AVC direct from your pay, and you can change or stop your contributions at any time. Of course, any changes will affect how much money you eventually have, and you’ll still pay charges.

Currently, when you reach 55, or possibly earlier if you’re in ill health, you’ll have several options for what to do with the money in your AVC.

You could do nothing, and leave your savings in your AVC where they could grow more. Remember, the value can go down as well as up and you may get back less than you put in.

You could cash it in. You can take 25% tax-free, and the rest is taxable. The tax you pay depends on your individual circumstances and tax rules may change in the future.

You could also leave the money in your pot and take lump sums from it until your money runs out, or you choose another option. Each time you take a lump sum, 25% of it is tax-free and the rest is taxable.

You can turn some or all of your AVC into a flexible retirement income, known as a drawdown, by transferring it into an existing or new flexi-access drawdown plan and taking an income or lump sums from it. Up to 25% of the money you transfer is tax-free, and any other withdrawals you make are taxable.

Or you could buy a guaranteed income for life which is taxable. This is known as an annuity. Potentially up to 25% of your pot can be taken tax-free at the time you buy your annuity.

If you want, you can choose a combination of these options that fit your needs.

Choose how you build and access your AVC pot

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Case studies: How AVCs could work for you

These case studies show some typical situations, but don’t relate to any particular individuals or circumstances. They aren’t recommendations or advice. To find out what AVCs could mean for you, use our AVC calculator below.

Christine's had a career break to raise her children and thinks AVCs could help her fill the gaps in her retirement savings.

This is an example of how AVCs could work for you. Christine’s story isn’t real, but it might sound familiar.

Christine is 36 and has just returned to work following the birth of her two sons.

Now she’s back at work, Christine’s main scheme pension has restarted. But she’s worried that her career break means she won’t have built up enough to fund the life she wants for her family when she retires at 67.

This is where AVCs could help.

As a basic rate taxpayer, Christine will receive 20% tax savings on any regular payment she makes into her AVC pot. The impact of taxation and any tax savings depends on your individual circumstances and may change in the future.

She decides to pay £50 a month, which only costs her £40 from her monthly take home pay. Over 31 years, with tax savings on her contributions and potential investment growth, she could have an estimated AVC fund value of £36,000.

Remember, this doesn't allow for inflation, and the value of your fund can go down as well as up and you may get back less than you put in.

Christine's scheme gives her a number of options for accessing her AVC pot, currently from age 55 or earlier if in ill health. Check your scheme rules to see which options are available to you.

Christine plans on turning her AVC into a flexible retirement income which is taxable, knows as a drawdown. She can do this by transferring it into a drawdown plan.

These figures aren't guaranteed, but they show how paying AVCs could help build up your retirement pot, helping you feel more confident about your future.

The figures in this case study are for illustrative purposes only and are not guaranteed. The figures assume 5% growth and 1% annual management charges for each year, your charges may differ. Charges can vary in the future and may be higher than they are now. The figures used do not take inflation into account which means the purchasing power of your fund value will be reduced in the future.

Frank is close to retirement, but thinks AVCs could give his retirement savings a boost, making his retirement dreams a reality.

This is an example of how AVCs could work for you. Frank’s story isn’t real, but it might sound familiar.

Frank is worried that his projected main scheme pension income won’t be enough to pay for the travelling he and his wife Elaine want to do when they retire. With just 8 years until retirement, he thinks he’s left it too late to make a real difference.

But AVCs could give Frank’s retirement a boost.

As a basic rate taxpayer, Frank will receive 20% tax savings on any regular payment he makes into his AVC pot. So when Frank contributes £400 a month, the actual cost to him is £320 from his monthly take home pay. The impact of taxation and any tax savings depends on your individual circumstances and may change in the future.

Over 8 years, with tax savings on his contributions and potential investment growth, Frank could have an estimated AVC fund value of £45,000. Remember, this doesn't allow for inflation, and the value of your fund can go down as well as up and you may get back less than you put in.

Frank and Elaine think this is plenty to get them started on their travel bucket list.

Frank’s scheme gives him a number of options for accessing his AVC pot, currently from age 55, or earlier if he’s in ill health. He could take cash lump sums from his AVC pot to fund his travelling or anything else.

If Frank's scheme didn't allow him to take his AVC pot in this way, he could transfer it to another pension product that would enable him to. Check your scheme rules to see which options are available to you.

These figures aren’t guaranteed, but they show that with AVCs you don’t have to put your retirement plans on hold.

The figures in this case study are for illustrative purposes only and are not guaranteed. The figures assume 5% growth and 1% annual management charges for each year, your charges may differ. Charges can vary in the future and may be higher than they are now. The figures used do not take inflation into account which means the purchasing power of your fund value will be reduced in the future.

Arjun thinks he could use AVCs to potentially retire early, or gradually, without reducing his pension benefits.

This is an example of how AVCs could work for you. Arjun’s story isn’t real, but it might sound familiar.

Arjun is 42, and looking at the projected value of his main scheme pension income, he thinks he’ll have to work until he’s 67 before he can afford to retire.

This is later than he’d like, as he wants to retire 3 years earlier at the same time as his wife Priya.

Taking his main scheme benefits early will also mean that some or all of it may be reduced by his scheme.

But by paying AVCs, Arjun could build up a retirement pot which will potentially allow him to retire early. Or he could retire gradually by reducing his hours and working more flexibly if his employer and scheme allow him to.

As a higher rate taxpayer, Arjun gets 40% tax savings on his contributions. So Arjun contributes £150 each month into his AVC pot, costing him just £90 a month from his take home pay. The impact of taxation and any tax savings depends on your individual circumstances and may change in the future.

By the time he turns 64, with tax savings on his contributions and potential investment growth, Arjun could have an estimated fund value of £62,500. Remember, this doesn't allow for inflation, and the value of your fund can go down as well as up and you may get back less than you put in.

Arjun’s scheme offers him a number of options for accessing his AVC pot, currently from age 55, or earlier if he’s in ill health.

Arjun decides to take his AVC pot as cash lump sums, in line with his scheme rules. This means he can start to fund his retirement 3 years early using his AVC pot, and wait until he’s 67 to start taking his main scheme benefits without any reductions.

If Arjun's scheme didn't allow him to take his AVC pot in this way, he could transfer it to another pension product that would enable him to. Check your scheme rules to see which options are available to you.

These figures aren’t guaranteed, but they show that with AVCs you might be able to retire sooner than you originally planned.

The figures in this case study are for illustrative purposes only and are not guaranteed. The figures assume 5% growth and 1% annual management charges for each year, your charges may differ. Charges can vary in the future and may be higher than they are now. The figures used do not take inflation into account which means the purchasing power of your fund value will be reduced in the future.

Kassie thinks AVCs could be a great way to save so she can help her daughter in the future, either with a student loan or buying her first house.

This is an example of how AVCs could work for you. Kassie’s story isn’t real, but it might sound familiar.

Kassie is 38, and her daughter Ada is 3. Kassie wants to give Ada the best start in life as she grows up. She decides to put some money aside to help Ada with whatever her future might bring, whether it be paying off her student loan or buying her first house.

She looks into ways to save, and realises AVCs could help her support Ada when the time comes.

Kassie contributes £100 a month into her AVC pot, which costs her £80 from her monthly take home pay thanks to her 20% tax savings as a basic rate taxpayer. The impact of taxation and any tax savings depends on your individual circumstances and may change in the future.

By the time Kassie reaches 55, with tax savings on her contributions and potential investment growth, she could have an estimated AVC fund value of £28,900. Remember, this doesn't allow for inflation, and the value of your fund can go down as well as up and you may get back less than you put in.

Kassie's scheme offers her a number of options for accessing her AVC pot, including taking her pot as one or more cash lump sums. Currently, she can do this from age 55, or earlier if she’s in ill health. So Kassie can help Ada when she needs it.

And if it turns out Ada doesn’t need the money, Kassie can always pick one or more of the other options that she thinks are right for her. Check your scheme rules to see which options are available to you.

These figures aren’t guaranteed, but they show how paying regularly into an AVC pot could give you a sizeable sum of money in the future.

The figures in this case study are for illustrative purposes only and are not guaranteed. The figures assume 5% growth and 1% annual management charges for each year, your charges may differ. Charges can vary in the future and may be higher than they are now. The figures used do not take inflation into account, which means the purchasing power of your fund value will be reduced in the future.

AVC calculator - what could you get?

Now you are becoming more familiar with how an AVC works, use the AVC calculator below to see what your monthly contributions could turn into. By changing the figures in 'Your details' below you can work out how much you might need to achieve your retirement goals. The figures in ‘Your summary’ are only a guide based on the details you enter. For illustrations, please read the Key features illustration document in the 'Apply' section of this site.

Your details

Monthly contribution (gross)

Contribution years

Please note you can contribute up to your 75th birthday as long as you are a member of your main pension scheme

Tax band

Your summary

Estimated AVC fund value

£0

Your estimated AVC fund value includes

Potential growth

£0

Tax savings

£0

Important information

The figures are for illustrative purposes only and are not guaranteed.
The figures assume 5% growth each year. The value of your fund can go down as well as up and you may not get back the amount you put in.
The figures assume annual management charges of 1% each year. Your charges may differ. Charges can vary in the future and may be higher than they are now.
The calculator does not take inflation into account which means that the purchasing power of your fund value will be reduced in the future.
The calculator does not take into account annual or lifetime allowances. Please read Important information about pensions allowances as the Government can change these allowances from time to time.
The tax savings are an estimate based on your chosen tax band. The tax you pay depends on your individual circumstances. Tax rules may change in the future.

Investment choices made simple

1. Understand the investment options you have available

Default investment option

If you’d rather not make your own investment choice, this option could be for you.

Lifestyle option

This option aims to provide long term growth with automatic switching of your money into different funds to protect the value of your AVC pot as you get closer to taking your benefits.

Choose your funds

If you’re comfortable choosing your own funds, you can choose up to ten from the risk rated funds available. This could be a good choice if you’re happy being in charge of your investments and fully understand the risks involved.

2. Read about the funds available to help you decide 

Check your Fund Guide for more information and to see which of these options are available to you. If you want information on a particular fund, click on the fund name in your Fund Guide to go to the fund factsheet.
It’s up to you to decide which investment option is right for your needs. Watch our 'Understanding your investment options' video for more information.
These options aren’t a recommendation from Prudential. If you’re still unsure, speak to a financial adviser.

3. Make a note of your choice 

You need to choose which investment option you want before you apply. Once you’ve made a decision, write it down so you have it to hand when you apply.
And don’t worry, you can change your investment choice at any time in the future – before, or after you’ve applied.

AVCs are investments so the value can go down as well as up and you may get back less than you put in.

Before you apply for AVCs

It takes approximately 10 minutes to apply, and you can do this online or by calling us.

To apply, you need:

bullet your payslip
bullet your investment choice

You'll need to call us if:

bullet you want to make a one-off contribution by cheque or through your pay and aren't paid monthly
bullet you want to contribute more than 80% of your gross regular pensionable pay or exceed the £40,000 annual allowance

View an example payslip

You need to read the documents below before you apply. They have important information about the key risks and benefits to help you make a decision.

Download and save and/or print these documents for future reference. Read instructions on how to do this.

Important information

Prudential has given no advice on this investment. If you're unsure if this product is suitable, please get financial advice.

Apply

Our online form is secure. Once you start this application, any data you enter will be temporarily stored by Prudential and its business partners. The data will be deleted if you don't submit the form, unless you've asked us to contact you to help you complete it. To start, just choose your country.

England & Wales

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Northern Ireland

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Scotland

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Once you've applied, you’ll receive a confirmation email. Remember you can register to manage your AVC plan online. Take a look at our online account user guide to see how you can get started.

Speak to a Retirement Specialist or apply by phone

You can also start your AVCs by calling our Retirement Specialist Team. They can’t give you advice, but they can help answer any questions you have about AVCs.

0800 151 3665 0800 151 3665

Monday to Friday from 9am to 5pm

To decrease your AVCs or for general enquiries about your existing AVC pot, please call our servicing team on 0345 600 0343. Lines are open Monday to Friday from 8.30am to 6pm.