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Issues to be aware of with regard USS AVCs

USS makes available payment of AVCs through the following mechanisms. Members can choose to do either USS AVCs or Prudential or a combination of the two subject to the various limits.

Final Salary Section members (Added Years)

Here members purchase extra years of service either by means of a single premium or a monthly contract up to age 65 (earlier dates to age 60 are permitted). The contribution limit is 15% of salary.

Members should be aware that the cost of purchasing these contracts has increased over the years and so should either use the USS modeller or obtain a quotation before undertaking a contract. They should also be aware of the fact that the terms offered differ over the years so for example if they have a contract in place from before April 2006 the terms on early retirement are more favourable than new contracts taken out post 'April 2006'.

Final Salary members can also opt for Prudential AVCs.

You can find further information in this USS factsheet (.pdf).

Career Revalued Benefits (CRB) Section (AVCs)

CRB members can purchase blocks of additional pension. Full information can be found in this USS fact sheet (.pdf).

Members should be aware that any monthly period of nil earnings will make void any monthly USS AVC so requiring another contract to be set up. This is particularly relevant for those whose employment regularly requires a period of nil earnings. As an alternative members could look to having a series of Single Premium contracts.

Prudential AVCs

Members can pay significantly more in AVCs to Prudential subject to salary and annual allowance restrictions.

Members can in some circumstances take all their AVC pot as a tax free cash sum. This is subject to the AVC pot not exceeding 25% of all USS benefits (including the Prudential portion).

Prudential operate an exit charge for new contracts taken out. In effect if someone starts an AVC contract and seeks to 'take the money' in most circumstances prior to the expiry of 5 years then a tapering charge applies as outlined below.

Please note that one could make a nominal payment in say Year 1 and cease contributions for say 5 years and recommence them and the later contributions would then not be subject to the exit charge i.e. the clock starts from the first payment.

YearCharge
115%
210%
38%
46%
55%
6No Charge


For fuller information please see the relevant USS fact sheet shown above depending upon if Final Salary or CRB member.

Members should note that anyone with a Free Standing AVC and wishing to transfer into USS can only do so to the Prudential AVC if the transfer is simultaneously part of a more general scheme transfer.

Last updated: 15 January 2016