What is Additional Voluntary Contributions?

Full Definition

Additional Voluntary Contributions (AVCs) are extra payments a member makes into a workplace pension scheme, over and above the standard employee and employer contributions. They are most common in defined benefit (final salary) schemes, where the AVC pot sits alongside the main pension and is invested separately, but the principle applies to defined contribution schemes too. AVCs attract tax relief at your marginal rate in the usual way, so a higher-rate taxpayer effectively gets relief at 40%. Contributions count towards the pension Annual Allowance, which is GBP 60,000 for 2026/27 (or the lower Money Purchase Annual Allowance of GBP 10,000 once you have flexibly accessed a pension). At retirement the AVC fund can often be taken partly as tax-free cash. AVCs matter because they offer a flexible, tax-efficient way to top up retirement provision, particularly for those approaching retirement who want to maximise their pension before the allowance or earnings are exhausted.

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