What AVC schemes are and where to find them

An Additional Voluntary Contribution (AVC) scheme is a pension savings plan run by your employer or a third-party provider that lets you save extra money for retirement on top of your main pension. Unlike your regular pension contributions, which are often mandatory, AVC contributions are entirely optional — you decide how much to add and when.

To find an AVC scheme, start by asking your employer's HR or payroll department whether one is available to you. Many large employers offer AVC schemes as part of their benefits package, and some have contracts with specific providers like Prudential, Standard Life, or Legal & General. Your employer will have documentation about the scheme, including how to enroll and what investment options are available.

If your employer does not offer an AVC scheme through payroll, you can open a personal pension or Self-Invested Personal Pension (SIPP) independently with any regulated provider. These work similarly to AVC schemes but are not tied to your employer. You can find providers by searching the Financial Conduct Authority (FCA) register at register.fca.org.uk to confirm they are regulated.

Key Takeaways

  • Ask your employer's HR or payroll team first — they will tell you if an AVC scheme exists and provide enrollment documents.
  • Employer-sponsored AVC schemes often offer tax relief automatically through payroll, which you lose if you set up a personal pension instead.
  • If your employer has no AVC scheme, you can open a personal pension or SIPP with any FCA-regulated provider.
  • Check the investment options, fees, and fund performance before committing, because different providers and schemes charge different amounts.

How to enroll in an employer AVC scheme

Once you confirm your employer offers an AVC scheme, ask payroll for the enrollment form or online portal link. Most schemes let you enroll through an employee benefits portal or by completing a paper form. You will need to decide how much to contribute each month — this can usually be a fixed amount or a percentage of your salary.

When you contribute through payroll, tax relief is applied automatically. This means if you earn £40,000 and contribute £100 per month, you only pay income tax on £38,800. A basic-rate taxpayer saves £20 per month in tax automatically; a higher-rate taxpayer saves £40. This is one of the biggest advantages of using an employer scheme rather than saving privately.

After you enroll, you will receive a scheme guide and investment options document. Read these carefully — they explain what funds you can invest in, what the charges are, and how to change your contributions or switch funds later. Keep your scheme reference number and login details somewhere safe.

Understanding fees and investment choices

AVC schemes charge fees in different ways. Some take a percentage of your contributions (for example, 0.5% per year), some charge a flat annual fee, and some charge a percentage of the total fund value. Over time, even small differences in fees add up significantly. A scheme charging 0.5% per year costs far less than one charging 1.5% over 20 years.

Most schemes offer a range of investment funds — typically a mix of stocks, bonds, and cash options. Some schemes also offer a "default" fund chosen by the scheme provider if you do not pick one yourself. If you are unsure which fund to choose, the default is often a reasonable middle ground, but you should still read the scheme guide to understand what it invests in.

Before you commit, compare the fees and fund options across schemes if you have a choice. Some employers offer multiple AVC providers; if yours does, ask payroll for the charges and performance data for each one. You can also check the FCA register to see if any complaints have been made against a provider.

Tax relief and how it works

Tax relief on AVC contributions happens in two ways depending on how you contribute. If you contribute through payroll (the most common route), relief is automatic — your employer deducts contributions before calculating your income tax. If you contribute directly to a personal pension, you claim relief through your tax return or by contacting HMRC.

The amount of relief depends on your tax band. A basic-rate taxpayer (20%) gets 20% relief; a higher-rate taxpayer (40%) gets 40%; an additional-rate taxpayer (45%) gets 45%. This means a £100 contribution actually costs a basic-rate taxpayer only £80 because the government tops up £20 through tax relief.

If you are self-employed or have income outside your main job, you can claim additional relief on a personal pension through your tax return. Keep records of all contributions and any relief you have claimed.

Moving or changing your AVC scheme

If you change jobs, you can usually leave your AVC savings where they are, transfer them to your new employer's scheme, or move them to a personal pension. Each option has different implications for fees and investment choices. Ask your new employer's payroll team what options exist before you decide.

If you want to switch funds within your current scheme, most providers let you do this online or by phone. Some schemes charge a fee for switching; others do not. Check your scheme guide or contact your provider to find out. You can usually switch as often as you want, though frequent switching may trigger charges or tax issues if you are not careful.

If you want to stop contributing to an AVC scheme, you can usually pause or cancel contributions without closing the account. Your existing savings stay invested and continue to grow. You can restart contributions later if you change your mind. Contact your scheme provider to discuss your options.

Finding independent advice about AVC schemes

If you are unsure whether an AVC scheme is right for you, or you want help choosing between options, you can speak to a financial adviser. Advisers regulated by the FCA can review your circumstances and recommend a scheme. Some charge a flat fee, some charge a percentage of the money you invest, and some are paid by the provider (which may create a conflict of interest).

Before paying for advice, check whether your employer offers free guidance through their benefits provider. Many large employers include a free consultation with a pension adviser as part of their benefits package. You can also contact Pension Wise, a free government service that offers guidance on pensions (though not personalized investment advice). Call 0800 138 3944 or visit pensionwise.gov.uk.

Be cautious of anyone who promises may provide returns or pressures you to move money quickly. Legitimate advisers will explain risks clearly and give you time to think. Check that any adviser you contact is on the FCA register before you share personal information.

Frequently Asked Questions

Can I contribute to an AVC scheme if I am self-employed?

No — AVC schemes are only available through employers. If you are self-employed, you can open a personal pension or SIPP instead, which work similarly but are not tied to an employer. You claim tax relief on contributions through your tax return.

What happens to my AVC savings if I leave my job?

Your savings remain yours. You can leave them invested in the scheme, transfer them to your new employer's scheme, or move them to a personal pension. You cannot withdraw them before age 55 (rising to 57 from 2028) unless you have a protected pension age or serious ill health. Contact your scheme provider to discuss your options.

Can I withdraw money from my AVC before retirement?

Generally no — AVC savings are locked until age 55 (rising to 57 from 2028). Some schemes allow small withdrawals in hardship cases, but this is rare and usually requires approval. Check your scheme guide or contact your provider to see if any exceptions apply to you.

How much should I contribute to an AVC scheme?

This depends on your income, other savings, and retirement goals. A common rule of thumb is to save 10–15% of your gross salary across all pensions, but your circumstances may differ. Pension Wise offers free guidance to help you think through this; you can also speak to a financial adviser for personalized recommendations.

What is the difference between an AVC scheme and a personal pension?

AVC schemes are run by your employer and offer automatic tax relief through payroll. Personal pensions are independent and you claim tax relief yourself. Employer schemes often have lower fees because the employer negotiates on behalf of all employees, but personal pensions offer more choice and flexibility if you change jobs frequently.