Comparison Guide Β· 2026/27
In-House AVC vs Freestanding AVC (FSAVC) UK 2026
Members of workplace defined benefit pensions who want to save more for retirement can typically choose between an in-house Additional Voluntary Contribution (AVC) scheme run alongside their employer's pension, or a freestanding AVC (FSAVC) arranged individually with an external provider. This guide compares the two for 2026/27, covering charges, investment choice and what happens if you change employer.
At a Glance
| Feature | In-House AVC | Freestanding AVC (FSAVC) |
|---|---|---|
| Set up by | Employer, alongside the main workplace scheme | You, individually, with a provider of your choice |
| Typical charges | Often lower β negotiated group scheme rates | Often higher β individual retail rates unless shopped around |
| Investment choice | Usually limited to the scheme's chosen fund range | Wider β you choose the provider and fund range |
| Payroll deduction | Usually available directly from payroll | Not automatic β often paid separately by the member |
| Portability on leaving employer | Tied to the main scheme; check specific transfer rules | Independent β continues regardless of employer |
| Counts towards annual allowance? | Yes | Yes |
When an In-House AVC Wins
- Your employer's scheme has negotiated low charges compared with what you could get individually
- You want the convenience of contributions deducted directly from payroll
- You are comfortable with the scheme's chosen investment fund range
When a Freestanding AVC (or a Separate Pension/SIPP) Wins
- You want a wider range of investment options than your employer's in-house scheme offers
- You value independence from your employer, for example if you expect to change jobs
- You have compared charges and found a competitive external provider is cheaper or better suited to you β note that a modern personal pension or SIPP is often a more flexible and competitively priced alternative to a legacy-style FSAVC and is worth comparing too
Frequently Asked Questions
What is an in-house AVC?
An in-house Additional Voluntary Contribution (AVC) scheme is set up and run alongside your employer's own workplace pension scheme (often a defined benefit scheme), typically through a provider your employer has selected and negotiated terms with. Contributions are usually deducted directly from payroll, and in many cases the scheme benefits from group charging terms negotiated by the employer, which can mean lower fees than an individual would get shopping around alone.
What is a freestanding AVC (FSAVC)?
A Freestanding AVC (FSAVC) is a separate, individual pension contract you arrange yourself with a provider of your choice, entirely outside your employer's scheme arrangements β the employer has no involvement in setting it up or negotiating charges. FSAVCs were more common before stakeholder and personal pension rules improved access to individual pensions, and are less frequently recommended today because in-house AVCs or a separate personal pension/SIPP often offer better value, but they still exist and some savers hold legacy FSAVC policies.
Which typically has lower charges?
In-house AVCs often benefit from charges negotiated by the employer for the whole scheme membership, which can be lower than an individually arranged freestanding AVC, where you are typically charged standard retail rates unless you specifically shop around. However, charges vary significantly by provider and scheme in both cases β always compare the annual management charge and any other fees on your specific in-house AVC options against current freestanding AVC or personal pension/SIPP alternatives before deciding.
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Do AVCs count towards the pension annual allowance?
Yes β contributions to any AVC (in-house or freestanding) count towards your annual allowance for tax relief purposes, which is Β£60,000 for most people in 2026/27, though it can be reduced (tapered) for very high earners or restricted to the money purchase annual allowance if you have already flexibly accessed a defined contribution pension. Tax relief on AVC contributions works the same way as on other registered pension contributions.
Can I move an AVC if I leave my employer?
Portability differs. An in-house AVC is usually tied to your employer's main scheme, so when you leave, the AVC pot typically needs to be dealt with alongside your main scheme benefits β options often include transferring out, taking benefits at retirement age, or, in some schemes, continuing contributions is not possible once you leave. A freestanding AVC, being a separate individual contract, generally continues independently of your employment, though you may lose the ability to contribute via that employer's specific arrangement. Always check the rules of your specific scheme and take regulated financial advice for defined benefit-related AVC decisions, since transferring defined benefit-linked AVCs can involve valuable guarantees that are easy to lose.
Key Sources
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Disclaimer: This comparison is general information, not personal financial advice. Figures reflect the 2026/27 UK tax year and can change. AVC decisions linked to a defined benefit pension can affect valuable guarantees β always check current HMRC/gov.uk guidance and speak to a regulated financial adviser before making a decision.