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.

On this page

The landscape is evolving

What to consider

How we can help

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.

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 your requirements.
Monitoring Reports
Provide “full” and “light touch” reports depending on your needs, including membership data analysis and commentary. Our review process reflects your circumstances to ensure our recommendations are right for you.
Member Communications
We have the experience, expertise and insights to tailor communications so your members stay engaged with their AVC investments and make the right choices.
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 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:

Jonathan Perera

Senior LGPS Benefits/Governance Consultant

jonathan.perera@mercer.com

Catherine Allen

Head of AVC Governance - DC & Savings

catherine.allen@mercer.com

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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