Maybe you're already paying into a Standard AVC and wondering if you're making the most of it. Maybe you've just been offered an AVC and want to choose the right one before you sign anything. Either way, you're in the right place and the answer to both questions is the same: there's a version of this that works harder, costs you less, and lands more in your pot every single month.
It's called a Shared Cost AVC. Here's everything you need to know.
A Standard AVC is an Additional Voluntary Contribution; extra money you pay into a pension pot on top of your standard LGPS contributions. It sits separately from your main pension, has the potential to grow with investment returns over time and could give you more to work with when you eventually retire.
The bit that makes Standard AVCs worth having: contributions come out of your salary before Income Tax is calculated. So if you're a basic-rate taxpayer, 20% of every contribution is effectively covered by the government. Higher-rate taxpayer? That could jump to 40%. You don't claim it separately, it happens automatically every payroll.
Standard AVCs are also flexible. You choose how much to put in, you can change it when life changes, and if you move jobs you’ll normally be able to either leave your AVC where it is or move it to your new employer’s arrangement. That’s often straightforward if the same provider is used, though transfers between different providers can depend on the schemes involved.
So far, so good. But, here's where it gets interesting.
A Shared Cost AVC does everything a Standard AVC does. The difference is one mechanism that changes the maths entirely.
With a Standard AVC, contributions come out before Income Tax. National Insurance, though, is still calculated on your full salary, so you pay it in full, every month.
A Shared Cost AVC fixes that. Contributions come out before both Income Tax and National Insurance are calculated. Two reliefs, not one. It sounds like a small tweak but the numbers suggest otherwise.
The key differences
Standard AVC
Income Tax relief: yes.
National Insurance relief: no.
Contributions taken: before Income Tax, after NI.
Flexibility: high.
Portable: yes.
Shared Cost AVC
Income Tax relief: yes.
National Insurance relief: yes.
Contributions taken: before both Income Tax and NI.
Flexibility: high.
Portable: yes.
A basic-rate taxpayer putting £100 a month into a Standard AVC gets around £125 landing in their pot after Income Tax relief. The same £100 into a Shared Cost AVC gets £138.75, because the NI saving is on top. That's £13.75 more every month. £165 more every year. For identical contributions, identical effort, identical everything, except which box you ticked when you signed up.
Compound that over a decade and the gap becomes one worth caring about.
If you're just starting out and deciding which type to open, it's worth knowing that a Shared Cost AVC offers everything a Standard AVC does, same pot, same flexibility, same options at retirement and adds National Insurance relief on top of Income Tax relief. For most people, that combination’s hard to look past.
If you're already on a Standard AVC, the question worth asking is a simple one: are you getting as much into your pot as you could be? A Shared Cost AVC delivers the same thing you already have, with an extra layer of tax efficiency built in. The additional NI relief means more lands in your pension every single month, for exactly the same contribution. Over time, that difference compounds into something genuinely worth having.
If you're a higher-rate taxpayer or close to the National Minimum Wage threshold after contributions are deducted, there are nuances worth checking. A free call with a My Money Matters finance coach can help you work through the specifics.
If you’re thinking about switching, it’s simple. When you complete the form to open your Shared Cost AVC, you’ll usually have the option to combine your existing savings into the new arrangement or keep them separate.
Whichever camp you're in, the process is the same and simple.
Check your employer offers a Shared Cost AVC through My Money Matters – your employee benefits portal or your HR team.
Decide how much you want to contribute. The minimum is £2 a month and you can adjust or stop any time, so there's no pressure to pick a number and stick with it forever.
Complete the form on the My Money Matters portal. Your payroll team and the Shared Cost AVC provider will take it from there. Contributions will begin once your application has been accepted by the provider.
That’s it. Your existing AVC savings continue building towards your retirement, with future contributions made through your Shared Cost AVC.
What is a Standard AVC?
An Additional Voluntary Contribution taken from your salary before Income Tax, giving you automatic Income Tax relief on everything you put in. A solid, flexible way to top up your LGPS pension, with investment choice and options if you move jobs.
What's the difference between a Standard AVC and a Shared Cost AVC?
One word: National Insurance. Both give you Income Tax relief. Only a Shared Cost AVC also takes contributions before NI is calculated, so you save on both. Same pension pot, same flexibility, more going in for the same cost to you.
Should I switch from a Standard AVC to a Shared Cost AVC?
If your employer offers a Shared Cost AVC through My Money Matters, it could be a smart move for your future. You'll keep everything you already have, and start getting more from every future contribution.
Can I transfer my existing AVC pot to a Shared Cost AVC?
Your Standard AVC will usually close when you switch, and your Shared Cost AVC will be set up for future contributions. During the process, you’ll normally have the option to combine your existing savings into the new arrangement or keep them separate, depending on what’s right for you.
Am I losing money by staying on a Standard AVC?
You're not losing what you've put in. But you are missing out on the National Insurance relief you'd get with a Shared Cost AVC, which compounds over time. The longer you wait, the more months you've contributed without it.
How much more would I save with a Shared Cost AVC?
A basic-rate taxpayer contributing £100 a month could get an extra £13.75 per month into their pot; the NI saving a Standard AVC doesn't provide. Higher earners contributing more will see a proportionally bigger difference. Over ten years, with compound growth, it could add up to a number worth switching for.
Whether you're switching from a Standard AVC or opening your first one, the Shared Cost AVC is the smarter move. It takes minutes, keeps your retirement savings working for you, and makes every future contribution more tax efficient than before. Start here.