Additional voluntary contribution schemes

There may be a limit on how much you can normally save into your workplace pension scheme. One way you can increase the amount you save for your retirement is by using an additional voluntary contribution (AVC) scheme connected to your employer’s scheme. This works in a similar way to a personal pension plan in that they’re “money purchase” arrangements. This means you typically buy units in one or more investment funds, building an additional ‘pot’ towards retirement. 

If you’re a member of a ‘final salary’ scheme (also known as a defined benefit scheme), another way is to buy ‘added years’. This effectively boosts the number of years’ membership in your employer’s scheme, increasing your benefits when you come to retire.

And finally, you can take out a free-standing additional voluntary contribution (FSAVC) scheme with a pension company – this will be independent of your employer’s scheme.

You may feel that you’ve been unsuitably advised to:

• take out an FSAVC instead of joining the ‘in-house’ AVC scheme offered by your employer, which may have matched your own contributions or had lower charges than the FSAVC
• invest in the employer’s money purchase AVC or an FSAVC instead of buying added years in the final salary scheme

We can’t consider all complaints about advice to invest in an employer’s money purchase AVC. But as the Pensions Ombudsman can’t consider complaints about advice at all, we still suggest that you refer it to us in the first instance - and we will let you know if we can help.

We also see complaints about the way FSAVCs and AVCs have been managed or administered. We’ll be able to consider this type of complaint if it’s about an FSAVC, but we may need to refer complaints about the way an AVC has been managed to the Pensions Ombudsman if it comes under the overall rules of your employer’s pension scheme. We’ll tell you if your complaint needs to be dealt with by another organisation.

To help us consider a complaint fairly, we’ll ask you to provide some information. We’ll make our decision about what happened using evidence provided by you, the financial business and any relevant third parties.

In reaching a decision, we consider:  

• the relevant law 
• any regulations that applied at the time 
• any industry codes of conduct in force at the time 

If we uphold your complaint, we’ll tell the financial business what it needs to do to put things right.

If we think you should have been advised to take out a money purchase AVC instead of an FSAVC

We’ll generally tell a business to pay compensation in accordance with guidance from the FSAVC Review. This will include situations in which you have:

• lost access to matched contributions or subsidised benefits from your employer
• paid higher charges for an FSAVC scheme instead of an AVC scheme

The review wasn’t intended to compensate for losses arising solely from poor investment returns in the FSAVC funds . But it is possible to complain about that specific issue if you feel the funds weren’t suitable for you.

And where appropriate, we may also tell the business to pay you compensation for any distress or inconvenience caused to you.

If we think you should have been advised to buy ‘added years’ instead of taking out a money purchase AVC or an FSAVC

If we uphold a complaint like this, we would typically tell the business to calculate a value of the lost added years and compare this with the value of your AVC or FSAVC to see if you’ve suffered a financial loss.

It’s relatively uncommon for us to reach that outcome, but if we think you wouldn’t have bought added years, we may still decide that you should have been advised to take out an employer-linked money purchase AVC instead of an FSAVC. See our guidance above on compensation for this type of complaint.

Where appropriate, we may also tell the business to pay you compensation for any distress or inconvenience caused to you.

If you’re a business looking for information to help you resolve complaints or want to find out more technical information, you can find more detail on handling complaints about additional voluntary contributions in the business section of our website.