Tax savings

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.

Income tax on pension 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.

Your rate of income tax

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.

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More information

Your NHS AVC

Here's a reminder of how AVCs work, so you can decide if changing your AVC contributions is right for you.

Flexible contributions

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.

Changing your investment

There’s no need to feel overwhelmed, when it comes to reviewing your AVC pot.

Flexible ways to take your money

You have a number of options to choose from when you decide to take money from your AVC pot, which you can currently do from age 55 (57 from 6 April 2028, unless you have a protected pension age), or possibly earlier if you're in ill health.

Trusted provider partnership

Prudential is an international financial services company, and long established provider of life insurance and pensions in the UK.