Additional Voluntary Contributions (AVCs)
Meeting statutory duties
Trustees are obliged under trust law and the requirements of the Pensions Acts 1995 and 2004 to exercise a duty of care in relation to the investment of AVC assets. This includes ensuring:
- They are offering a competitive investment product, in terms of the provider(s), their services and charges;
- That there is a suitable range of investment options; and
- That the investment managers are suitable
The DB pension scheme’s Statement of Investment Principles (SIP) should also cover what the Trustees are doing in relation to their AVCs.
An increased focus on AVCs in DB pension schemes
With increased scrutiny of governance arrangements through the General Code, Pension Dashboards on the horizon, changes to pension taxation limits, well documented service issues delivered by some AVC providers, and many Trustees looking at end game planning, it is more critical than ever that Trustees add a review of their AVC arrangements to their business planning, if they haven’t already.
Reviewing AVCs isn’t just about monitoring investment performance either. Data quality, orphaned AVC members, opaque with-profits policies with misunderstood terms and conditions, cyber security, poor administration experiences are just some of the things Trustees need to incorporate to achieve good retirement outcomes for their members.
How we can help
Training
Reports
-
1. Performance Report
This is a basic performance monitoring report with performance tables and member fees only. No members funds or assets provided. This is suitable for Unit-Linked only AVC policies. -
2. Performance Plus Report
This is the minimum report available if With-Profits policies are included. This is a basic performance monitoring report with performance tables and member fees. It will also include the number of members and asset values. It can be done for Unit-Linked only AVCs if this additional level of detail is desired. -
3. Governance Report
This report covers member demographics, performance, member fees, With-Profits contract terms, underlying performance and bonus rates, fees, provider commentary, Trustee duties, options for Trustees, case study, recommendations and commentary throughout. This covers all the necessary governance reporting for Trustees. -
4. Endgame Planning Report
This report covers everything included in the Governance report and also covers buy-in / buy-out considerations with respect to DC / AVCs. This includes recommended planning actions to secure the DC / AVC assets outside of the scheme so that the Trustees can take appropriate actions as part of the journey planning. Whilst this report does not include regulated advice, we would expect this to follow on from trustee agreement to our proposals for securing DC / AVCs outside of the current trust.
Member Communications
Consolidation and discharge
Whether it’s about consolidating providers, harmonisation or investment changes, our AVC team experts provide regulated advice and manage change projects from start to finish.
Our AVC team supports you with your endgame planning as part of buy-in and buyout projects. By engaging with AVC providers and understanding the various buyout AVC solutions available, we are well-equipped to navigate the complexities surrounding AVC policy guarantees, including With-Profit funds and tax-free cash linkages.
While demands on Trustees are wide and varied, doing nothing about your AVC arrangements should not be an option. We can help you take a proportionate and pragmatic approach to help you deliver the best value to your members and meet your statutory obligations.
