METHODIST MINISTERS’ PENSION SCHEME
Additional Voluntary Contributions – Explanatory Leaflet
Introduction
If you are a member of the Methodist Ministers’ Pension Scheme you may pay
Additional Voluntary Contributions (AVCs) to enhance your retirement benefits.
You may, at the same time, make contributions to an external arrangement such as
a Free Standing AVC, a stakeholder or personal pension. You may wish to seek
independent financial advice on the question of external personal arrangements
versus the internal AVC arrangement.
How much can I pay?
AVCs paid to the Scheme are deducted from Stipend and you receive immediate tax
relief in the same way as your ordinary contributions. There is a limit set by HM
Revenue and Customs (HMRC) on total contributions on which members can claim
tax relief, which may be made to the Scheme and any other pension arrangement of
100% of your income or £3,600 if higher.
If you wish to pay the maximum contributions allowable you would still have to
receive a nominal Stipend to cover deductions eg, NI contributions and PAYE. For
practical reasons the maximum level of contributions (ordinary and AVCs) that the
Scheme can accept is 80% of ministerial taxable earnings. You may wish to seek
independent advice about topping-up your contributions to the HMRC (100%) limit.
You may pay regular AVCs monthly or quarterly of a fixed amount or as a fixed
percentage of Stipend. You may also make single AVC payments.
What benefits will I receive?
The AVC arrangement operates on a defined contribution basis, that is, contributions
paid accumulate with investment returns to provide a fund on your retirement or
earlier death. The amount of the AVC fund cannot be guaranteed. At retirement you
have the option of either converting it into additional pension or taking it as a lump
sum, which is currently tax free, subject to HMRC limits.
How are my AVCs invested?
AVC funds are invested with the Central Finance Board.
credited to an Account set up for you within the Scheme.
benefit statement to enable you to see how your Account
note that the value of your Account can fall (if the
investments fall) as well as rise.
The contributions paid are
You will receive an annual
is building up. You should
values of the underlying
The Trustee has chosen a Lifetime style of investment for AVCs. The purpose of the
Lifetime Fund is to ensure that your contributions are invested to reflect your
changing investment needs ie, your funds will be invested predominantly in equities
up to age 50 for growth and then will be switched gradually to bonds and cash in the
years approaching retirement to lock in capital security.
The AVC funds are invested in accordance with the ethical investment stance
agreed by the Trustee of Scheme for all its assets, which is consistent with Methodist
Church policy.
What are the charges?
1% of your contributions will be deducted for administration charges, and the
remainder is invested in your Account within the Scheme. You will also bear the
underlying investment charges built into the unit funds with the Central Finance
Board.
What benefits are available if I die before retirement?
If you die before retirement the contributions in your Account will be available to
provide either a lump sum for your beneficiaries or a pension for your dependants.
What benefits are available if I leave the Scheme?
If you leave the Scheme before Normal Pension Date you will be entitled to one of
the following benefits, depending upon the option chosen in respect of benefits from
the main Scheme:
(i) a refund of your AVCs less tax (ii) a pension or lump sum payable at Normal
Pension Date or earlier retirement (iii) a transfer value of the AVC Account to an
external pension arrangement.
Recycling lump sum payments
HMRC are concerned about members “recycling” their tax-free lump sums and you
should be aware of its policy. Recycling will occur if you use a tax-free lump sum
from another pension arrangement to increase your AVCs to the Scheme. To
combat this HMRC has introduced anti-avoidance legislation so that if “recycling”
occurs the lump sum would no longer be paid tax-free. For “recycling” to occur there
must be “pre-planning” ie, the member has taken a conscious decision to use a taxfree lump to pay significantly greater pension contributions. If you have any queries
about “recycling” you should seek independent financial advice.
Application to pay AVCs
If you wish to apply to pay AVCs you should complete the Application Form with this
leaflet and return it to the Pensions Office at the following address:
Pensions Office
Methodist Church House
25 Marylebone Road
London NW1 5JR
If you have any questions on the AVC arrangements please contact the Pensions
office, telephone 020 7486 5502 or email: pensionshelp@methodistchurch.org.uk