Save more into my pension
Find out how you can save more for the retirement you want.
Save more for retirement with Additional Voluntary Contributions (AVCs)
You can boost your retirement savings in a tax-efficient way with Additional Voluntary Contributions (AVCs). Unlike your Clergy pension, your AVCs build up a pot of money that goes up and down depending on the money that goes in, and how the investments perform.
If you earn enough to pay tax, your AVCs are tax-free when they go in and we can usually pay most or all your AVCs back to you tax-free when you retire.
We invest your AVCs with Legal & General Investment Management. If you paid AVCs with us in the past, they might be invested with Prudential or Equitable Life.
When you retire you can use your AVCs to provide:
- more tax-free cash,
- more pension (but you will need to transfer your AVCs to another provider for this), or
- a mix of both.
How much can I save?
You can save in two ways:
- monthly through your stipend or salary, or
- one off lump sums.
If you save monthly through your stipend or salary, the minimum amount you can save is £10 a month. The maximum you can save is 100% of your taxable earnings, less any deductions such as Heating, Lighting and Cleaning.
There is no minimum or maximum amount if you would like to save a one off lump sum.
You can increase, decrease, stop and start your AVCs at any time - just head to PensionsOnline.
You can only save AVCs with us while you are in pensionable service.
How does tax relief work?
AVCs can be one of the most tax-efficient ways of boosting your retirement savings.
If you keep within certain limits, your AVCs are tax-free when they go in, and we can usually pay most or all your AVCs back to you tax-free when you retire.
Monthly AVCs through my stipend or salary
The easiest way to get tax relief is to save AVCs through your stipend or salary.
The best thing about paying monthly through your stipend is the tax relief is all sorted for you through your payroll. You pick the amount you would like to save, and we collect and invest this for you.
If you are a 20% taxpayer, for every £100 you save, only £80 comes out of your stipend or pay, or if you are a 40% taxpayer, only £60 comes out.
If you do not pay tax, you do not get tax relief, but you might have to pay tax on your AVCs when you retire, so check whether AVCs are the best place for your savings.
Saving a lump sum
Saving a lump sum can be a great way to give your AVCs a big boost. But be careful, you only receive tax relief on your taxable earnings.
If you are thinking of saving a large amount, speak to a financial adviser first to check how much tax you can claim back.
As you will have already paid tax on your lump sum, you can claim the tax back by completing a self-assessment tax return at www.gov.uk/self-assessment-tax-returns
HMRC usually refunds you after the tax year has ended.
Tax relief limits
You have a limit on how much you can save or earn in a pension each tax year. This is called your Annual Allowance. If you go over this, you usually have to pay a tax charge.
This limit looks at how much your pension has gone up over the tax year, allowing for inflation, and we then multiply this amount by 16. Working this out can be complicated, so ask us to calculate this for you.
You can find out more about Annual Allowance at
What difference does saving more into my pension make?
Saving extra money into your pension can give your retirement savings a healthy boost. Saving an extra £50 a month into your pension for 10 years can make a significant difference, thanks to the power of compound interest. Here's a simplified example to illustrate the potential growth.
£50
Monthly contribution
£600
Annual contribution
£6,000
Total over 10 years
By the end of 10 years, your total contributions of £6,000 could grow by approximately £7,872, assuming returns are 5% each year. The interest earned over the 10 years could be around £1,872.
Don't forget, you get tax-relief back on your £6,000, so if you're a 20% tax-payer, it will only cost you £4,800.
You could receive back as tax-free cash
How much could I get back tax-free?
When you retire, we might be able to pay all, or most of your AVCs back to you tax-free. But there is a limit.
To work out how much we can pay you tax-free, we use this formula.
We multiply your annual Clergy pension by 20. Then, we add on your tax-free lump sum and the value of your AVCs. We divide the whole amount by 4 to get 25%, then we take off your Clergy tax-free lump sum. What’s left is how much you can take from your AVCs tax-free.
If your AVCs are less than the amount that is left, we can pay all your AVCs back to you tax-free. If it is more, we can still pay the tax-free amount to you, and you can decide how you would like to take the excess.
How much we can pay you tax-free depends on how much your Clergy pension is, and the size of your AVCs. These examples below show how much we could pay you tax-free.
These figures are if you retire at age 68 and are only examples. If you retire before or after this, the figures will be different.
If you would like to know how much you could take tax-free, ask us and we can let you know.
What if my AVCs are under the tax-free limit?
Great news, we can pay all your AVCs to you tax-free. Keep going with your AVCs. Remember, you will still get tax-relief on what you save now.
If your AVCs are comfortably below your tax-free limit, you could think about increasing your AVCs to bring this closer to your tax-free limit.
But, once you pay AVCs you can only get these back when you retire, so only pay what you can afford.
If your AVCs do not reach your full tax-free limit you can give up part of your Clergy pension for extra tax-free cash to bring you up to your maximum limit.
What if my AVCs are over the tax-free limit?
Keep saving and get tax relief on the amount you save. When you retire, we will pay as much to you tax-free as we can.
With the rest, you could:
- take it as a taxed lump sum,
- move it to another pension provider and either take an income from it, or spread it over multiple tax years
All these options are classed as income and they could push you into a higher tax band.
You could pay less tax by transferring the amount we cannot pay you tax-free to another pension provider and spreading it over more than one tax year.
If you want to, you could transfer all your AVCs to another pension provider. How the tax works would then be different.
Should I keep building up my AVCs?
Whether your AVCs are likely to be under or over the amount we can pay you back tax-free, it is still worth building up your AVC pot.
You will still get tax relief on the money you save now. If you save more than your tax-free limit, we can still pay a large portion of your AVCs back to you tax-free.
Should I save more into my pension?
Saving extra money into your pension comes with great tax advantages, but there are things to think about before saving more.
Find a balance with other savings
Saving into your pension means your money is locked away until you retire. A balanced way to save might include saving into an ISA (or other types of investment), which gives you immediate access to your money if you need it. This will give you a good mix of saving for the long term, and having access to money at moments that matter.
Retirement goals
It is worth thinking about the lifestyle you want in retirement. Will your current savings get you there? If you need to save more, and you can afford to do this, topping up your pension will help.
Start early with little and often
The sooner you start, the more time your pension has to grow. Saving little and often each month can be more affordable than saving larger amounts closer to retirement.
Regular contributions help you build your pension steadily over time. Smaller, frequent amounts may be easier to fit into your budget.
Add a one off lump sum
If you have money set aside and would like to add this to your pension, check you can afford to make a big lump sum contribution without impacting your financial stability.
A balanced approach might work best. If you can make both regular small contributions and occasional larger ones, you might be able to maximise the benefits of both strategies.
How to invest my AVCs
Choose your investments
There are three different ways you can invest your AVCs.
Through our default Lifestyle option
This is our default investment option. It invests your AVCs in higher risk funds while you are some way from retirement and automatically switches your savings into safer funds when you are 5 years from your Target Retirement Date.
Not everyone is comfortable choosing how they invest so our Lifestyle option is the default option for those who prefer to leave their investing to us.
Our FTSE4Good Lifestyle option
This is a responsibly invested alternative to our default option. It works in the same way, but it has responsible investment considerations.
You can pick your own investments from our selected list
If you feel confident to pick your own investments, you can choose one or more of the 9 investment funds we offer.
If you choose your own investments, you need to decide:
- how much risk you want to take,
- how much to invest in each fund,
- how often you review this,
- whether you need to switch funds, and
- when to switch funds.
Lifestyle option
This is our default investment option
It invests your AVCs in higher risk funds while you are some way from retirement and automatically switches your savings into safer funds when you are 5 years from your Target Retirement Date.
Until you are 5 years from your Target Retirement Date your AVCs are invested equally between company shares in the UK and overseas.
Once you reach the 5-year point before your Target Retirement Date, your AVCs automatically switch to cash.
The switch happens gradually, with a portion of your AVCs switching every quarter until it is fully invested in Cash.
FTSE4Good Lifestyle option
This is a responsibly invested alternative to our default option
It works in the same way, but it has responsible investment considerations.
Until you are 5 years from your Target Retirement Date your AVCs are invested equally between company shares in the UK and overseas. Both funds invest in the FTSE4Good.
Once you reach the 5-year point before your Target Retirement Date, your AVCs automatically switch to cash. The switch happens gradually, with a portion of your AVCs switching every quarter until it is fully invested in Cash.
Most people do not know exactly when they will retire, but it can help to have an idea of when this might be.
Both Lifestyle options line up your AVCs ready for you to take at a specific date. This is your Target Retirement Date. If you don't tell us when you think this might be, we will pick age 68 for you.
Picking the right date can be important. If you take your AVCs much later than your Target Retirement Date your money will be invested in Cash for longer, so inflation might start to erode its value.
Pick your own investments
We have 9 investment options you can choose from. You can select one or more of these.
If you are some way from taking your AVCs you probably want to focus on growth, so higher risk funds might be suitable.
If you are closer to retirement you might be more concerned with avoiding risk, so medium or lower risk funds may be best.
You might want to pick several funds across different asset groups to spread your risk. If you choose high risk funds, you could switch to lower risk funds as you approach retirement.
The higher the potential reward from an investment, the greater the risk the value could fall.
Funds with lower risk can give lower returns over the long-term. If you invest too safely for too long, you might get a low return, and inflation could exceed your returns meaning you lose money in real terms.
Legal & General takes a fee each year to manage the investment fund. This is called an Annual Management Charge, or AMC. The charge is in brackets.
The high risk funds are in green. The medium risk funds are in blue. The low risk fund is in orange.
Change my investment choice
If you would like to change your investment choice, click the button below to download the form you need.
Try and consider current market conditions and the economic outlook before switching. It's a common saying, but past performance isn't an indicator of how well things will perform in the future.
The closer you are to retirement, the less risk you might want to take.
If you're ever unsure, switching can be a crucial decision, so consider speaking to a financial adviser first.