Frequently Asked Questions - About retirement
Can I choose when I want to retire?
Your Additional Voluntary Contributions (AVCs) can be taken at any time between the ages of 55 and 75. You may be able to defer taking your pension by transferring to another pension arrangement before age 75.
If you choose to take your benefits before or after scheme pension age (normally 60 - or 65 for nuvos members) you may incur penalties.
What if I die before I retire?
A lump sum payment will be made to your dependants if you should die before taking retirement benefits. This will be equal to the full value of your AVC fund at the time of death. Please see your scheme brochure for more information.
If you die before you retire, normally no inheritance tax is payable on the value of your AVC fund. However, if your AVC fund is used to provide a lump sum death benefit, any amount in excess of the Lifetime Allowance will be subject to a tax charge. There's normally no such charge if your AVC fund is used to provide a pension for your husband, wife, registered civil partner or dependants, although these pensions are treated as earned income and could be taxed in payment.
What happens if I leave service?
If you leave, payments to your AVC must stop. If you are aged between 55 and 75 then you may be able to start taking your AVC benefits. You may also be able to defer taking your pension by transferring to another pension arrangement before age 75. If you take your AVC benefits before or after scheme pension age, your pensions benefits may be affected (or there might be a penalty), depending on your circumstances.
What happens when I retire?
The AVC fund built up on your behalf under the Scheme will be used to buy a taxable pension for you together with, if you wish, any spouse’s, dependant’s, or civil partner's pension payable on your death after you retire. It is possible to shop around amongst insurance companies to take advantage of the most favourable market rates for converting the fund value to pension when you retire.
If the pension is purchased from Scottish Widows, the pension you receive will normally be paid on the first day of each month, and will continue for the rest of your life. Although you can choose to have your AVC pension paid at the same level every month, you may wish to keep inflation in mind when deciding what future pension you will need to continue to enjoy a comfortable lifestyle throughout your retirement years. So when purchasing your pension, it could be to your advantage to buy a pension that increases each year. However, you should bear in mind that the starting level of your pension will be lower as a result than if you had purchased a pension that stays at the same level.
Alternatively, you can take up to 25% of your AVC fund as tax free cash with the remainder being taken as a smaller taxable pension.
A Lifetime Allowance, set by the Government, will apply to the total value of pension benefits you can receive from all your pension arrangements. A tax charge must normally be deducted from any benefits that exceed the Lifetime Allowance, before they can be paid. The Lifetime Allowance for the 2011/2012 tax year is £1.8 million.
The next step?
If you are considering joining the Civil Service Additional Voluntary Contribution Scheme and would like more information please call Scottish Widows on 0800 0284 419 from 9am - 9pm weekdays and 9am - 1pm on Saturdays.