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Free Standing Additional Voluntary Contributions (FSAVCs) are a method by which members of company defined benefit schemes can save extra money towards retirement outside of the company scheme.
You can invest up to 15% of income in a Free Standing Additional Voluntary Contribution policy, ( excluding any contributions already going to the company scheme), and the premiums get tax relief. Income is total income, not simply the definition used by the company scheme.(Many company schemes define pensions only in respect of BASIC salary, and take no account of bonuses, cars, overtime etc. This means that to retire on say, 50% could be 50% of £10,000 basic income, ( ie £5000), not 50% of the £20,000 that you actually earn, ( which would be £10,000).
Example. You earn £10,000 basic plus £10,000 bonus, ( not included in company definition) and pay 6% to the company scheme. You pay £600, but could pay £3,000. I.e. , you can top up by £2400 into a Free Standing Additional Voluntary Contribution Scheme.
The Free Standing Additional Voluntary Contribution fund is tax exempt, but must all be used to purchase pension. ( This lack of tax free cash is not really a problem as the company scheme provides cash ).
You may only contribute to any one Free Standing Additional Voluntary Contribution provider in any tax year.
One slight problem for those with variable income. Unlike the Personal Pension Plan you must contribute to the policy in the current tax year, i.e. perhaps before you actually know how much you earned. This is a Catch 22 situation. Make the best of it and write to the Chancellor suggesting that he extend carry back and carry forward rules to FSAVCs.
Use this quick little JavaScript* to see how much you can contribute to your policy, and
the Net Premium as determined by your tax rate.
See also In house schemes.