AVCs - Ensuring the best value for LGPS members 

  • Author
    Jonathan Perera
    Senior LGPS Benefits/Governance Consultant
  • Author
    Catherine Allen
    Head of AVC Governance - DC & Savings

Administering authorities of Local Government Pension Scheme (LGPS) Funds have a regulatory duty to provide active members with access to Additional Voluntary Contribution (AVC) arrangements. There are varying approaches taken to the governance of these arrangements.

The landscape is evolving, but are LGPS AVC arrangements keeping up?

LGPS Funds are required to offer an AVC facility to their members and many take varying approaches to the governance of those arrangements. AVCs can often be the poor relation to the Fund’s main investments yet monitoring/review/member outcomes are all still important issues that Funds should consider.

With increased scrutiny of governance arrangements, Pension Dashboards on the horizon, changes to pension taxation limits and well documented service issues of some AVC providers, we recommend Funds add a review of their AVC arrangements to their business planning, if they haven't already.

What to consider

Funds should provide members with value for money, a suitable range of AVC investments, and sufficient information for them to optimise their AVC pot and make informed decisions at retirement.

To achieve this, Funds need to consider the following key areas/questions:

  • Membership

    What are the characteristics of their AVC population? e.g.

    • Where are they on their retirement journey?
    • What are they investing in?
    • Are they taking up death in service options?
    • Why don’t members make AVCs?
    • Are there inconsistencies between Fund data and that of the provider?

  • Performance

    What has the level of performance been across all providers / investments? How does it compare to the market?

  • Value for Money from Providers

    While charges can be monitored and reviewed, it isn’t just about “cost”. What is the quality of providers' administration, communication and overall governance of the arrangements they provide?

  • Investment Options

    Is the range of investments suitable, taking into account the balance between risk and return, including any default options?

  • Legacy Providers

    Can Funds consolidate the AVC providers they use? What are the costs and benefits associated with a move?

How we can help

With our knowledge of the sector and deep understanding of providers, we can provide services to help Funds meet their objectives, and fulfil statutory obligations.
  1. Training
    Ensures stakeholders understand AVCs, their obligations, the options available, so they can make informed decisions. We offer both officer and committee/board training depending on the requirements of the Fund.
  2. Monitoring reports
    Provide “full” and “light touch” reports depending on the Fund's needs, including membership data analysis and commentary. Our review process reflects your circumstances to ensure our recommendations are right for the Fund.
  3. Member communications
    We have the experience, expertise and insights to tailor communications so LGPS members stay engaged with their AVC investments and make the right choices.
  4. Change
    Whether it’s about consolidating providers, harmonisation or investment changes, our experts provide regulated advice and guide change projects from start to finish.
While demands on Funds are wide and varied, doing nothing about your LGPS AVC arrangements should not be an option. We can help Funds take a proportionate and pragmatic approach to help them deliver the best value to their members and meet their statutory obligations.
Authors
Jonathan Perera

- Senior LGPS Benefits/Governance Consultant

Catherine Allen

- Head of AVC Governance - DC & Savings

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