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BeeHive  >  BeeLines  >  AVCs no longer compulsory!

AVCs no longer compulsory!

A long time ago, back in 1986, at a time when pensions were being shaken up in a kind of root and branch way as they are again today, Additional Voluntary Contributions (AVCs) were quite the thing. The 1986 Act, which unleashed Personal Pensions onto an unsuspecting world, also required employers running occupational pension schemes to provide an AVC facility. Before then AVCs were available only at the discretion of scheme trustees and quite a large number of schemes didn’t bother to make them available to members. So, at the time of the big boom in Personal Pensions after the 1988 implementation of the 1986 stuff, AVC schemes became big business too. They were seen as a kind of Personal Pension for people in occupational schemes who couldn’t have them.

The bullet that wasn’t bitten back in the late 1980s was that there really was no real reason why AVCs should have ever existed at all. To the uninitiated they looked and felt like Personal Pensions, particularly the free-standing (FSAVC) version. It would have been easier all round if people in occupational pension schemes could have just had Personal Pensions as well. It would have been less confusing for a start.

Well, times have changed. The new rules proposed by the Inland Revenue will allow people to have different types of pension at the same time after 6 April 2005. This being the case, it’s obviously looking a bit silly to keep making employers provide an AVC facility for people in pension schemes. I mean, why not make a Personal Pension and a Stakeholder Pension available too? Sooner or later this will need looking at that’s for sure.

Well, it’s happened already. Tucked away in the small print of all the stuff from the Department for Work and Pensions last week is a little paragraph saying employers will no longer be required to provide an AVC facility after A-Day. The end of an era. Just like when the Berlin Wall came down, our strange occupational scheme rules and regulations are going to go bit by bit until we forget they were ever there.

Steve Bee
23 June 2003


The information provided is based on Scottish Life’s understanding of proposals included in the DWP paper Action on occupational pensions issued on 11 June 2003. These proposals are subject to consultation and may change in the future.