LGPS | AVC Briefing | July 2024
AVCs
Ensuring the best value for your members
Administering authorities of 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 your 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 you add a review of your AVC arrangements to your business planning, if you 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 your 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 your 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 you consolidate the AVC providers you 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 you meet your strategic objectives, and fulfil your statutory obligations.
While demands on Funds 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.
To explore how Mercer can help you please contact:
Contact us
For more information on how Mercer can help LGPS Funds and their stakeholders, visit www.uk.mercer.com/lgps or contact your usual Mercer consultant.
Important notes
This content is for information purposes only. It does not constitute advice specific to your Fund and you are responsible for obtaining such advice. Mercer does not accept any liability or responsibility for any action taken as a result of solely reading it.
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