Additional Voluntary Contributions let you top up your workplace pension with extra tax-relieved savings, either through your existing scheme or a separate arrangement. This guide explains how in-house and free-standing AVCs work, the annual allowance limit, and how they compare with a standalone personal pension.
What an AVC Is
An Additional Voluntary Contribution is an extra amount you choose to pay into a pension on top of your regular workplace pension contributions, aimed at building up more retirement savings and benefiting from tax relief on the extra money. AVCs are common among members of both defined benefit and defined contribution occupational pension schemes who want to save more than the scheme's standard contribution level.
In-House vs Free-Standing AVCs
An in-house AVC is arranged through your own employer's pension scheme, generally with lower charges since it uses the existing scheme's administration. A free-standing AVC (FSAVC) is a separate pension arrangement with a different, independent provider, giving more choice of investments and portability between jobs, but usually with its own separate set of charges to weigh against the convenience of an in-house option.
Tax Relief on AVCs
AVCs generally receive tax relief in the same way as your normal pension contributions, whether through a relief at source arrangement or a net pay arrangement, depending on how your scheme operates. This effectively reduces the real cost of the extra saving based on your marginal rate of income tax, making AVCs particularly attractive for higher and additional rate taxpayers.
The Annual Allowance
AVCs count towards your total pension savings for the tax year when checking against the annual allowance, which is £60,000 for most people in 2026/27. This can be reduced for very high earners under the tapered annual allowance, or to £10,000 under the Money Purchase Annual Allowance if you have already flexibly accessed a defined contribution pension -- both are worth checking before paying a large AVC.
AVC vs a Separate Personal Pension
Whether an in-house AVC or a separate personal pension (or SIPP) suits you better depends on relative charges, investment choice, and whether your employer offers any additional matching or incentive specifically for AVCs. In-house AVCs are often cheaper because they use your existing scheme's infrastructure, while a personal pension or SIPP may offer a wider range of investment options -- comparing the specific costs and choices available to you is worthwhile before deciding where to direct extra pension savings.
Frequently Asked Questions
What is an Additional Voluntary Contribution (AVC)?
An AVC is an extra contribution you choose to pay into a pension arrangement on top of your normal workplace pension contributions, to build up additional retirement savings and benefit from tax relief on the extra amount, typically used by members of defined benefit or defined contribution occupational schemes wanting to save more than their standard scheme contribution.
What is the difference between an in-house AVC and a free-standing AVC (FSAVC)?
An in-house AVC is arranged directly through your own employer's pension scheme, usually with lower charges and simpler administration since it sits alongside your main scheme. A free-standing AVC (FSAVC) is a separate pension arrangement with a different provider, offering more choice and portability if you change jobs, but often with its own separate charges.
Do AVCs get the same tax relief as normal pension contributions?
Yes. AVCs generally receive tax relief in the same way as your normal pension contributions -- through relief at source or net pay arrangements depending on how your scheme operates -- effectively reducing the real cost of the contribution based on your marginal rate of income tax.
Show 7 more questionsShow fewer questions
Do AVCs count towards the annual allowance?
Yes. AVCs count towards your total pension contributions for the year when checking against the annual allowance, which is £60,000 for 2026/27 for most people, though this can be lower if you have already flexibly accessed a defined contribution pension (triggering the money purchase annual allowance) or if the tapered annual allowance applies to very high earners.
Can I take AVC savings as a tax-free lump sum?
This depends on the type of AVC and scheme rules. Many defined contribution AVC pots can be used flexibly at retirement in a similar way to other defined contribution pensions, while some older in-house AVCs linked to a defined benefit scheme have specific rules about how the tax-free element is calculated -- check with your specific scheme administrator for how your AVC pot can be accessed.
Is an AVC better than opening a separate personal pension?
It depends on charges, investment choice, and whether your employer offers any additional matching or incentive on AVCs. In-house AVCs are often cheaper to run than a separate personal pension because they piggyback on your existing scheme's infrastructure, but a personal pension or SIPP may offer wider investment choice -- comparing charges and options for your specific scheme is worthwhile before deciding.
Can I stop or change my AVC contributions at any time?
Generally, yes -- AVCs are voluntary and most schemes let you increase, decrease, pause or stop them relatively easily, though the exact process and any notice period depend on your specific scheme rules, so check with your employer or scheme administrator.
What happens to my AVC pot if I leave my employer?
An in-house AVC pot linked to your old employer's scheme generally stays invested until you access it at retirement, though some schemes allow (or require) a transfer to another pension arrangement once you leave -- check your scheme's specific leaver rules, since this can affect charges and investment options going forward.
Are AVCs worth it if I am a higher or additional rate taxpayer?
AVCs can be particularly attractive for higher and additional rate taxpayers because the tax relief on the contribution is worth more at those higher rates, though this needs to be weighed against your annual allowance headroom, how much access to the money you might need before retirement, and your overall pension provision across all schemes.
What happens to my AVC savings if I die before taking them?
AVC pots are usually paid out to your beneficiaries as a lump sum or, in some cases, as a pension, and are typically dealt with under the scheme's discretionary death benefit rules in a similar way to the rest of your pension savings -- keeping your nomination of beneficiaries form up to date with your scheme is important to help trustees direct the payment as you intend.
Disclaimer: This guide reflects AVC and annual allowance rules for 2026/27, using the £60,000 standard annual allowance confirmed for the year. This guide is for general information only and is not professional advice. Consult a qualified adviser and refer to gov.uk for current official guidance before relying on any treatment.
