What Are Additional Voluntary Contributions (AVCs), And How It Can Help You.
Additional Voluntary Contributions are extra funds you can opt to add to your mandatory pension contributions, or simply set aside as retirement savings. These funds would be deducted from your monthly emolument by your employer and remitted into your Retirement Savings Account (RSA), along with your regular pension contributions.
AVC differs from other regular savings you may have, as it is deducted from your salary before tax. This is a significant advantage of the AVC, as it means the contributions are tax-free and lower your overall tax liability.
Benefits of AVC
• Additional Voluntary Contributions are pooled into Trustfund Pensions RSA Fund and, therefore, are invested and managed in the same rigorous manner as your regular pension contributions.
• An additional advantage, and a major difference from regular pension contributions, is that you are at liberty to decide the amount you wish to contribute, in addition to the frequency of the contributions; e.g. monthly, quarterly, bi-annually or annually.
• You can also withdraw from, or liquidate, your AVC at any time. Note, if a withdrawal/liquidation is made within five years after the AVC was remitted, there will be a tax charge as tax exemption only applies to contributions that remain invested for a minimum of five years.
• In addition to boosting your retirement funds, AVC can also serve as a form of targeted savings towards specific projects, such as, mortgages, children’s school fees or a dream vacation.
Voluntary Contribution Withdrawal
A contributor can withdraw from the balance standing to his/her Voluntary Contribution (VC) Account. However, income earned on any voluntary contribution made shall be subject to tax at the point of withdrawal where the withdrawal is made before the end of 5 years from the date the voluntary contribution was made.