Planning for retirement is a crucial aspect of financial wellbeing, and one way to potentially enhance your retirement savings or retire earlier than planned is through AVCs. 

What are AVCs?

AVCs are  extra payments that you can choose to make into your Pension Account in addition to the standard contributions you make for the benefits provided by the TotalEnergies UK Pension Plan (the Plan). These contributions are voluntary and can be adjusted according to your financial situation and retirement goals. 

How do AVCs work?

You can make extra contributions into the Plan which are then invested in a separate pot to give you another pot of money for retirement. You can begin taking your AVC pot from age 55 (57 from April 2028) as well as your pension income from the Plan. 

AVCs work in the following ways:

• Contribution flexibility: you can decide how much to contribute as AVCs, and these contributions can be adjusted or stopped at any time, depending on the Plan rules.
• Tax efficiency: AVCs are usually made from pre-tax income, meaning they can reduce your taxable income and potentially reduce how much you’re taxed.
• Investment options: the contributions will be invested in funds chosen by the Plan, and the returns on the investments will affect the final value of the AVCs. Some pension schemes may offer a range of investment options, allowing you to tailor your investment strategy based on your preferences.
• Accessing AVCs: when you retire, you can take your AVCs in various ways – taking a lump sum, an annuity, or drawdown, depending on your preference and the Plan rules.

The value of AVCs will depend on the contributions you’ve made, how long the contributions have been invested, and how your investments perform over time.

Are AVCs a good investment?

The benefits of AVCs depend on the arrangement and type of pension you have, how well your investments perform, any charges, and any other circumstances that may affect your retirement. 

However, AVCs may offer several advantages when it comes to saving for retirement:

• Enhanced retirement income: by contributing more into your pension, you may increase your income at retirement or be able to retire earlier than planned
• Flexibility and control: they can offer flexibility to be able to stop or change the amounts that you contribute over time.
• Tax relief: you’ll receive tax relief at source on your contributions (up to certain limits). For more information on tax relief, you can visit MoneyHelper.
• Growth potential: with the right investment strategy, AVCs may grow significantly over time due to compound interest and investment returns, potentially enhancing the overall value of your Pension Account.

If you’re interested in contributing AVCs, it may be worth seeking financial advice. You can find a regulated independent financial adviser by visiting MoneyHelper.

If you choose to pay AVCs, you can do so by visiting Success Factors.