Using your lump sum payment to increase your pension
If you receive a bonus or one-off lump sum payment in January as a result of either the annual Professorial Salary Review or the Exceptional Contribution Award (ECA) round, you may wish to use it to enhance your pension by paying this as an Additional Voluntary Contribution (AVC). If you decide to make an AVC, you will not pay tax on this amount.
Additional Voluntary Contributions (AVCs)
The main AVC options available through the pension schemes operated by the University are:
For USS members:
1. Purchase added years in USS (the amount you can pay may be limited)
2. Contribute to the money purchase scheme operated by Prudential (there is a choice of investment options available)
For USPS members:
3. Contribute to the money purchase schemes with Clerical Medical (offering a with-profits fund) or Aviva (who offer a range of managed funds).
If you are a member of the NHS Pension Scheme, please contact the Pensions Office for further details.
There are some restrictions on how much you can pay as AVCs. For example you can only pay up to 15% of annual earnings in the tax year to date into the USS added years scheme. For the other arrangements you can contribute up to 100% of your earnings after deductions, but before tax. The Pensions Office can give you full details, but are unable to advise you. You can find an independent financial adviser in your area by visiting www.unbiased.co.uk (USS members can also find an adviser through the USS website at www.uss.co.uk)
At retirement, you can choose how to use your AVC. This can be taken as additional pension or it can be used towards your tax free cash entitlement (subject to restrictions).
Making the payments and getting the timing right
If you decide to make an AVC payment it can take a few weeks to arrange, depending on the type. You should contact the Pensions Office to discuss your requirements and they will explain what you need to do and how long it is likely to take.
It is probably easiest for your own personal cash flow situation if the AVC payment is taken out of your salary in the same month as you receive the bonus.
Notifications of bonus awards from the professorial salary review and Heads' Contribution Scheme are this year being made in February with the payments following in February's payroll. This is unlikely to allow enough time for the AVC payments to be arranged. The University is, therefore, giving you the option to choose to delay your bonus by a month to March, so that both the bonus and the AVC payment are paid in the same month.
You can give notification that you would like to delay your bonus to March by filling in the form (on the right) and returning it to: Reward & Benefits, Department of Human Resources, Firth Court, Western Bank.