PSI25.3.7 - Flexibility in Pension Provision – Flexible Use of AVCs- AVC Benefits Paid Late

(This archived guidance relates to HMRC discretionary practice before the 6th April 2006. For current guidance on Registered Pension Schemes see the Registered Pension Schemes Manual)

If a member chooses to defer AVC benefits beyond the time employer funded benefits come into payment, there will be no entitlement to a lump sum from the AVC fund when the deferred benefits subsequently come into payment. A member with a pre 8 April 1987 AVC arrangement may choose to take a lump sum (within the usual limits) from the AVC fund when employer funded benefits come into payment and defer taking pension benefit from the residual fund.

Where AVC benefits have been deferred after employer funded benefits, there is no objection to the AVC fund being accessed by means of income withdrawal during the period of annuity deferral provided the rules of the scheme contain the appropriate provision to cater for this.

Deferring AVC benefits will reduce the maximum lump sum entitlement for a member whose lump sum is calculated by reference to the initial amount of the pension in payment; the pension equivalent of the deferred AVC fund will not count towards the initial amount of the pension.