One reason you might choose to save for your retirement with AVCs, alongside your main scheme pension, is the tax savings they offer.
Regular AVCs are taken from your pay before tax, so the money you’d normally pay as income tax will automatically go into your AVC pot instead, as you can see below. If you pay tax at a higher rate, your tax savings will be higher. If you don't pay tax, you won't benefit from tax savings.
The total amount of tax relief you get on your pension savings is limited so make sure you're aware of the 'Important information about pension allowances'. The UK Government may change these allowances from time to time so check their website to see any changes which may impact you. If you think you might be affected, you can get more information from the HM Revenue & Customs website.
Tax savings will depend on your individual circumstances and rules can also change.
As your contributions are deducted from your earnings before your tax bill is worked out, the amount of income tax you pay will be based on what’s left.
If you're a Scottish taxpayer, you’ll pay tax based on the Scottish Rate of income tax and tax bands. For more information on Scottish income tax, visit gov.uk/scottish-rate-income-tax.
If you're a Welsh taxpayer, you’ll pay tax based on the Welsh Rate of income tax and tax bands. For more information on Welsh income tax, visit gov.uk/welsh-income-tax.
An AVC plan is a separate pot of money you build up alongside your NHS pension, that aims to give you extra retirement benefits.
It’s important to plan for your future. You may need more money than you think when you retire.
Life isn’t always as simple as we’d like it to be. Some things take us by surprise and those surprises can cost money, so flexibility is important when it comes to saving for the future.