Pensions explained
LGPS AVC vs APC: Extra Savings or Extra Yearly Pension?
An AVC builds a separate pot of invested savings. An APC buys extra pension paid each year by the LGPS. The key difference is what you receive: a pot whose value can change, or extra yearly scheme income.
LGPS England and Wales · not Scotland or Northern Ireland
2 min read · By Pension Bible editorial team · Sources checked
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In this guide
AVC: an invested pot
An in-house AVC is held with the fund’s AVC provider. Investment performance and charges affect its value. The fact that the main LGPS pension is defined benefit does not make the AVC’s investment return guaranteed.
Shared-cost arrangements involve employer participation. Ask whether one is available and how payroll handles it; do not assume the arrangement advertised by another employer applies to you.
APC: a quote for extra annual pension
APCs purchase additional scheme pension. The official quote takes account of factors including age, the amount of pension and payment method. Eligibility and payment conditions apply.
Keep the quote’s annual pension amount separate from its contribution cost. A £1,000 investment balance and £1,000 of yearly pension are not the same unit, so placing them in a single “which is bigger” comparison is misleading.
Check retirement timing and cash treatment
The way an AVC is taken can affect the tax-free-cash options. The fund needs to check scheme conditions and the allowances available. Do not turn “may be able to take all as cash” into a blanket guarantee.
Obtain an illustration that identifies when the main pension and AVC are taken, which amounts are taxable and whether any benefits are reduced. A source-checked fund quotation is more useful here than a generic investment-growth forecast.
Source: LGPS — taking your AVC.
Checklist for a like-for-like discussion
You do not need every detail to understand the difference. If you want figures for your own pension, these questions will help your fund explain the options.
- Which scheme jurisdiction, section and arrangement does the quote cover?
- What leaves my pay, what does the employer pay, and how is tax handled?
- Does the quoted benefit mean a pot value or an annual pension amount?
- What are the investment charges or the quoted APC contribution terms?
- What changes on stopping payments, leaving work, early retirement or death?
- What cash option is available when these benefits are taken, and which allowances does it use?
Source: LGPS — contribution options.