A teachers' pension AVC is one way to top up; Additional Pension is the other main route, and the two work very differently.

Teachers' Pensions describes four ways to increase your benefits: Additional Pension, Buy Out, Faster Accrual and Additional Voluntary Contributions (AVCs). None is called added years: Additional Pension is the route that buys extra yearly pension inside the scheme. Whether any route pays off depends on your age, tax and plans. Torn between the two main routes? An FCA-authorised adviser will weigh Additional Pension against an AVC for your salary at no cost; to book that call, a teacher only needs the form on this page. This page covers the Teachers' Pension Scheme in England and Wales.

Teachers' pension AVCs or Additional Pension: what is the difference?

Additional Pension is extra scheme pension that you buy; an AVC is a separate invested pot with a provider. Teachers' Pensions describes AVCs as contributions that "build up an additional pension that is separate to your teacher's pension", while Additional Pension is a set amount of extra annual pension held alongside your main benefits.

Additional PensionTeachers' AVCs
What you getA fixed extra amount of yearly pension, bought in multiples of £250 a yearA pot of money invested in funds; its value can go down as well as up
Who holds itTeachers' PensionsPrudential (the Department for Education's arrangement) or another AVC provider you choose
When it is paidWith your main pension, though phased retirement lets you take it laterNot linked to your Teachers' Pension; from age 55, with the minimum age rising to 57 from 6 April 2028
Upper limitAn overall limit on Additional Pension bought by you or your employer, reviewed each financial yearPension tax limits such as the annual allowance

You cannot move money from one to the other. Teachers' Pensions says: "It’s not possible to purchase Additional Pension in the Teachers' Pension Scheme with funds accrued under either an AVC, or Free Standing AVC arrangement, or by using a tax-free lump sum from another pension arrangement."

How Additional Pension works

You pay for it from your salary or in one lump sum. Additional Pension "can be bought in multiples of £250 per annum", and the maximum payment period is 20 years, which must finish before your normal pension age. The cost depends on your age, how much you want and how you pay, and it is reviewed after each scheme valuation, so what you are charged can rise or fall. Teachers' Pensions says it is important to check the correct amount is being deducted.

Once bought, it grows. It is index-linked, with the increase applied each April at the same rate as the annual Pensions Increase on public service pensions. The Teachers' Pension annual increase page explains how that rate is set.

Several rules matter when you come to take it:

  • It is paid when your main pension is, although phased retirement lets you take it later.
  • Taken before normal pension age, it is actuarially adjusted, as the main pension is.
  • If you stop paying early, or leave before the payment period ends, the amount is worked out from what you have paid so far.
  • You can convert part of it into a tax-free lump sum when you retire, as with the main pension.
  • If you are granted ill-health retirement within a year of payments starting, the contributions are refunded; after more than a year, you receive an unreduced Additional Pension.

Your dependants are not automatically covered. Additional Pension "does not increase your main Scheme benefits", so unless your election also covers dependants, it will not be paid after your death as part of a dependant's pension. Choosing that cover pays 50% of the yearly amount to a surviving adult, at a higher cost. Your employer can also buy Additional Pension for you, within an overall limit.

Paying teachers' AVCs into the Prudential plan

The Department for Education has an arrangement with Prudential, "but you can use other companies". Teachers' Pensions calls the Prudential plan the In House AVC facility. Prudential describes itself as "the appointed AVCs provider to Teachers' pensions". Its Teachers' AVC page says you apply online with your payslip, after choosing an investment option, and that once you register for its online service you can change your AVC contributions and how you are invested.

Because the pot is separate, payment is not tied to your pension. Teachers' Pensions says: "You could access your teachers’ AVC at any time from age 55." Meanwhile a Free Standing AVC with another provider follows that provider's rules, which can vary. The normal minimum pension age is due to rise to 57 from 6 April 2028, so confirm which age applies to you.

As for tax-free cash, GOV.UK says "You can usually take up to 25% of the amount built up in any pension as a tax-free lump sum", and it puts the overall ceiling, the lump sum allowance, at £268,275. Timing the draw on an AVC pot beside your main pension is something an adviser can explain on the free call that follows the form.

Tax relief on extra pension, and the annual allowance

Pension contributions attract tax relief up to a limit: relief on contributions worth up to 100% of your annual earnings, and HMRC can ask for anything over that back. For Teachers' AVCs, Prudential's Teachers' AVC page offers an income tax calculator that it says can show how much tax relief you could get on your pension contributions. GOV.UK explains that relief comes either automatically or through a claim, depending on the type of scheme and the rate of Income Tax you pay.

The annual allowance is the ceiling. The allowance is £60,000 for the current tax year, according to GOV.UK, and it takes in growth in a defined benefit scheme over the year as well as money paid into defined contribution schemes. Teachers' Pensions warns that if the growth in your benefits exceeds the annual allowance, you may face an annual allowance charge, and says to take advice before making a lump sum payment for Additional Pension. The annual allowance page and the Teachers' Pension tax relief page cover the mechanics, and salary sacrifice compared with AVCs has its own guide.

Teachers' Pensions also says the scheme pays only Pension Commencement Lump Sums, not the other kinds of tax-free lump sum.

Is topping up your Teachers' Pension worth it?

It can be, but it depends on what you want the money for. Weighing extra scheme pension against an AVC pot is easier with someone looking at your payslip and other pensions, and the form here arranges a phone call with an adviser at no cost to you.

Points to weigh:

  • Additional Pension gives a known yearly amount that rises with Pensions Increase, but its price can change, and what you pay is reviewed.
  • An AVC pot is flexible but invested, so you could get back less than you paid in.
  • Teachers' Pensions caps the total Additional Pension that you and your employer can buy, and reviews that cap each financial year.
  • A surviving adult's pension from Additional Pension is not automatic: you have to elect for it, and it costs more.
  • Faster Accrual and Buy Out are different tools: see the faster accrual page and the early retirement section of taking your Teachers' Pension early.

The general guide to whether AVCs are worth it sets out the pros and cons across pensions, and the calculator page shows how your main pension builds, which is the baseline for any top-up. Teachers' Pensions has a flexibilities calculator, and Pension Wise is the free government guidance service for defined contribution pots such as an AVC.

Teachers' Additional Pension and AVC questions

Do I have to take my AVC when my Teachers' Pension starts?

No. Teachers' Pensions says payment of your teachers’ AVC benefits "is not linked to payment of your pension" from the scheme, and you could access them from age 55.

Can Additional Pension be taken partly as tax-free cash?

You can convert part of the yearly Additional Pension into a one-off tax-free lump sum when you retire, as with your main pension. It counts towards the lump sum allowance. The Teachers' Pension lump sum page covers the allowance.

Can I stop paying Additional Pension?

Yes. You can cease the election before the full term, and Teachers' Pensions then works out your final Additional Pension from the contributions paid up to that point.

What is Buy Out?

Teachers' Pensions says the career average scheme's standard reduction for retiring early, between 65 and 68, is 3%, and that you can pay to Buy Out that reduction and retire at 65 without it. You only have one opportunity, within six months of first entering the career average scheme. The early retirement page has more.

Can I reduce my Teachers' Pension contributions?

Not the main rate, which follows the contribution tiers. You can stop Additional Pension early, and Prudential's online service lets you change Teachers' AVC contributions.

Is topping up different for Scottish teachers?

Scottish teachers belong to a separate scheme administered by the SPPA, so its own top-up options apply rather than the ones described here; see Teachers' Pension in Scotland.

A top-up decision that rests on your other pensions and tax can be talked over free by phone: send the short form and wait for the adviser's call. How the scheme as a whole works is on the Teachers' Pension Scheme page.

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