The questions and answers below provide a basic guide to the Shared Cost Additional Voluntary Contribution Scheme, known as SCAVCs or SSSCAVCs.
Please note that neither your employer, the Gwynedd Pension Fund nor the Local Government Pension Scheme (LGPS) are able to provide advice on the suitability of SCAVCs for staff. Other options for saving for retirement are available. For details of other options for saving for retirement within the LGPS, please refer to the LGPS or Gwynedd Pension Fund websites, or seek independent financial advice from your preferred adviser.
1. What are Shared Cost Additional Voluntary Contributions (SCAVCs)?
SCAVCs provide an opportunity for staff who are members of the LGPS to pay additional contributions in order to increase their pension benefits at retirement. SCAVCs are an efficient way to save for retirement because you will pay less tax and less National Insurance, provided that your income is already sufficient to pay tax and National Insurance. This is also subject to certain overall limits set by His Majesty’s Revenue and Customs (HMRC).
If you choose to pay SCAVCs, the additional contributions are invested separately in your choice of fund or funds managed by Legal & General, which is the in-house SCAVC fund provider for the Gwynedd Pension Fund. The Gwynedd Pension Fund administers the LGPS for your employer.
Your SCAVC funds should, hopefully, grow over time and will be available at retirement to convert into an additional pension, known as an annuity, or, subject to certain limits, be taken as a tax-free lump sum or a combination of both. Any interest, income or capital gain earned on the SCAVCs is free from tax while the money is invested in your plan.
Legal & General offers a range of funds with differing investment risks. You will need to look at its investment fund factsheets for further information:
Legal & General AVC investment information
2. How does a SCAVC work?
Under a SCAVC, you contractually agree to reduce your salary and, in return, your employer will pay the forfeited gross salary into the SCAVC fund on your behalf.
In order to qualify as a “shared cost”, you additionally agree to contribute £1 of your total SCAVC amount yourself. This £1 will not form part of the salary sacrifice arrangement.
As an example, if you complete a SCAVC application stating that you would like to pay SCAVCs of £50 each month, you will enter into a salary sacrifice arrangement for £49 per month, with a personal contribution of a further £1 to bring the total contribution up to the desired level of £50.
The advantage over traditional AVC contributions is that the amount paid on your behalf by your employer, which is your salary sacrifice amount, is subject to savings in both tax and National Insurance, rather than only the tax saving available through a traditional AVC arrangement.
Due to the contractual nature of salary sacrifice agreements, you must enter into an agreement to reduce your gross salary for a minimum period of 12 months. This means that, when commencing your SCAVC arrangement, you must have an employment contract that runs for more than 12 months from the arrangement’s start date.
Although you must commit to a minimum duration of 12 months, you can change the amount you pay at any time.
3. How much can I pay into a SCAVC?
Under pension rules, the amount you and your employer can theoretically pay into the AVC is up to 100% of your pay in any tax year. However, because a SCAVC is operated through a salary sacrifice arrangement, you cannot contribute an amount through a SCAVC that would reduce your pay below the National Minimum Wage.
You may sacrifice a sum that would reduce your salary to the National Minimum Wage level and then contribute any further desired amount through a standard AVC arrangement. However, you will only benefit from National Insurance contribution savings on the SCAVC amount.
Please note that your employer will ensure that you have sufficient pay after any SCAVC reductions to meet all lawful deductions from your pay.
It is important to remember that you may become subject to a tax charge if you make pension savings that exceed the Annual Allowance in any tax year. This is the amount by which the value of a person’s accrued pension rights can grow in one year free of tax. This limit includes:
- The growth in the value of your main LGPS benefits.
- Any SCAVCs paid by you and your employer.
- Contributions to other UK-registered pension schemes in a tax year, between 6th April and the following 5th April.
For the tax year 2026/27, the Annual Allowance for individuals with income of less than £260,000 a year is £60,000. You may be subject to a reduced, or tapered, Annual Allowance if your total income exceeds £260,000.
Your employer recommends that you seek financial and/or tax advice before paying SCAVCs if you think the tapered Annual Allowance applies to you. You will also be subject to a reduced limit if you have flexibly accessed any money purchase pension savings. Your pension scheme will have informed you if this applies to you.
For more details about the Annual Allowance, visit the HMRC Annual Allowance information.
4. How much will I save?
The amount you save will vary depending on your individual circumstances, the amount you earn and the amount you wish to contribute through the SCAVC scheme.
If your current earnings are already below the threshold for paying tax and National Insurance, you will not make a tax or National Insurance saving on contributions made through the SCAVC scheme.
You may still see a return on your investment based on how the funds in which your contributions are invested perform, but this is not guaranteed and the value may go down.
5. Can I see an example of the savings?
Sian has an annual salary of £20,000 and is a basic-rate 20% taxpayer who is considering paying £1,200 into the SCAVC scheme. If Sian decides to join the SCAVC, her annual salary will be reduced by £1,188, resulting in a monthly reduction in her gross pay of £99.
Sian will not have to pay income tax or National Insurance contributions on the £99. This will save her £19.80 per month in income tax and £7.92 per month in National Insurance contributions, a total salary sacrifice saving of £27.72 per month or £332.64 per year.
In return for giving up £1,188 of her salary, her employer will pay the same amount into her AVC fund, while Sian pays £1 per month as her personal contribution. The £1 AVC contribution qualifies for tax relief but not a National Insurance reduction. For Sian, this means that her personal AVC contribution of £12 per year will cost £9.60 after tax relief.
Therefore, by participating in the SCAVC, the gross cost to Sian of investing £1,200 into her SCAVC plan will be reduced to a net cost of £864.96, calculated as follows:
| Calculation | Amount |
|---|---|
| Salary sacrifice reduction | £1,188.00 |
| Sian’s personal shared cost contribution | £12.00 |
| Total contribution | £1,200.00 |
| Less income tax saving on salary sacrifice | (£237.60) |
| Less National Insurance saving on salary sacrifice | (£95.04) |
| Less income tax relief on Sian’s personal contribution | (£2.40) |
| Net cost of SCAVC | £864.96 |
Although Sian’s net SCAVC cost is £864.96, her AVC fund will receive £1,200, which is a 38.7% increase on her net contribution.
The table below shows how the monthly and annual tax and National Insurance savings arise:
| Calculation | Monthly | Yearly |
|---|---|---|
| Gross salary before tax | £1,666.67 | £20,000.00 |
| Salary reduction | £99.00 | £1,188.00 |
| Personal AVC contribution | £1.00 | £12.00 |
| Tax saving | £19.80 | £237.60 |
| Additional tax saving on £1 personal contribution | £0.20 | £2.40 |
| National Insurance saving | £7.92 | £95.04 |
| Total savings | £27.92 | £335.04 |
The example above is based on tax and National Insurance contribution rates for 2026/27.
6. Who is eligible to participate?
All employees of your employer who are members of the Local Government Pension Scheme are eligible to join the SCAVC. This includes part-time employees.
However, as SCAVCs require a commitment for a minimum of 12 months, you must have a contract of employment that runs for more than 12 months from the start date of your arrangement. If you have a contract with a duration of less than 12 months, you will not be able to enter into a SCAVC arrangement.
A salary sacrifice scheme cannot reduce your cash earnings below the National Minimum Wage. Where a request to participate in the SCAVC scheme would result in this happening, you will be advised and asked to revise your request.
7. When can I join a SCAVC?
You may join the SCAVC scheme at any time by completing the appropriate application form available from the Gwynedd Pension Fund.
You will also be sent full details of the SCAVC facility and FAQs, and you will be required to accept the terms before deductions can commence. Salary sacrifice will then normally commence in the pay period following receipt of your application.
8. How do I join the SCAVC scheme?
If you want to join the Shared Cost AVC scheme, you should complete the application form and return it to your employer’s Payroll Department. Your employer will arrange the relevant payroll deductions and notify the Gwynedd Pension Fund and Legal & General.
Once your AVC account is set up, Legal & General will contact you directly to provide more information about your account, including details of how to register for and access its online Member Portal.
The portal will let you view your AVC fund, monitor its value, and review or change your investment choices in the future.
9. When can I take the SCAVC benefits from this arrangement?
The benefits must be taken at the same time as the attached main pension scheme benefits. They cannot be deferred to a date later than the date on which the main scheme benefits are taken.
10. Should I be worried by the fact that you are reducing my gross pay?
Reducing your gross pay by participating in the SCAVC scheme will not have an impact on any redundancy pay or occupational payments you are likely to receive, such as maternity, paternity, adoption or sick pay.
Your employer will use your original pre-sacrifice salary as the basis for payroll calculations. This will be referred to as your “notional salary”.
Some statutory payments, such as Statutory Sick Pay or Statutory Maternity Pay, may be lower because they are based on earnings subject to National Insurance contributions. However, in most cases, employees receive the higher of either occupational pay or statutory pay.
If you are likely to receive only statutory benefits for any period, you should carefully consider whether participation in the SCAVC scheme will be worthwhile.
11. What happens if I am absent due to illness or maternity?
For as long as you are entitled to the relevant occupational payment associated with your absence, such as Occupational Sickness Pay or Occupational Maternity Pay, Shared Cost AVC contributions can continue.
If you are in a position where only statutory payments are payable to you, your employer will change your contributions from the Shared Cost AVC scheme to the standard AVC scheme, provided that you continue to receive this level of pay.
If the absence continues so that your entitlement to occupational and statutory payments ceases, and you no longer receive any pay from your employer, contributions will be frozen until you return to work and pay becomes due again.
12. What happens to earnings-related payments such as overtime?
Participation in a SCAVC will not affect payments such as overtime or the premium rate for working nights, as these will continue to be calculated using your notional salary.
13. Will my normal LGPS pension be affected?
LGPS Regulations treat SCAVCs as part of your pensionable pay. The contributions that both you and your employer make to the Local Government Pension Scheme will therefore continue as though your salary had not been reduced.
Consequently, your main LGPS benefits will not be affected by joining the SCAVC scheme, including any benefits due to your dependants in the event of your death. You will therefore have the same main scheme pension benefits as someone who does not pay SCAVCs.
14. I currently receive tax credits. Will joining a SCAVC affect my entitlement to tax credits?
As the tax credit calculation is based on your taxable P60 income, a new entrant to the SCAVC scheme will see a reduction in taxable pay. Your tax credit entitlement may therefore change.
Given the complexities involved in calculating entitlement to tax credits, visit the GOV.UK tax credits information for more information, or contact HM Revenue & Customs.
15. I am currently repaying a student loan. Will this alter my repayments?
Yes. Student loan repayments are calculated using the salary on which you are liable to pay National Insurance contributions. Under a SCAVC, your total gross salary on which National Insurance contributions are paid will reduce, so your student loan repayments will decrease.
You should bear in mind that any decrease in your loan repayments may result in you repaying your student loan over a longer period.
16. Will participating in a SCAVC affect any contribution-based benefits?
If the SCAVC means that your gross pay is less than the annual Lower Earnings Limit for National Insurance contributions, it may affect your eventual entitlement to the Basic State Pension and you may lose entitlement to certain other benefits.
Therefore, if your monthly pay is less than the Lower Earnings Limit of £559 per month, or £6,708 per year in 2026/27, you should carefully consider the possible impact before joining the SCAVC scheme. These thresholds can change each year.
17. Can I participate in any other salary sacrifice arrangements?
You will need to contact your employer for information about other salary sacrifice arrangements. You may participate in more than one arrangement. However, if increasing your total salary sacrifice amount would cause your earnings to fall below the National Minimum Wage, you will need to consider which scheme or schemes to join.
18. Can I withdraw from the SCAVC?
Normally, under the terms of a salary sacrifice agreement, cancellation will not be permitted for a minimum period of 12 months after you enter the scheme. At the time of joining the SCAVC, you must have an employment contract that runs for at least 12 months.
You may reduce or increase your contributions at any time, including during the first 12 months, subject to completing and submitting the appropriate form available from the Gwynedd Pension Fund.
19. How do I vary my monthly contribution?
Under the terms of the Shared Cost AVC, you may reduce or increase your contributions at any time, including during the first 12 months.
When you wish to vary your contributions, you will need to:
- Get the dedicated form from the Gwynedd Pension Fund.
- Send an email directly to your employer’s Salaries Department with your salary number, date of birth and the new amount you would like to contribute.
20. What happens if I leave my employment?
If your employment with your employer ends for any reason, your entitlement to participate in the SCAVC will cease when you leave.
If you have LGPS membership of two years or more, your SCAVC plan will remain invested and will be available to provide you with additional benefits when you retire. Alternatively, you may transfer all your local government SCAVC benefits to another pension scheme that is willing to accept the transfer.
If you have less than two years’ LGPS membership when you leave your employment, you may choose to receive a refund equal to the realisable value of your SCAVC plan. Please note that the value of the SCAVC refund will be reduced to take account of the tax relief you received during the period in which contributions were made.
21. Where can I get more information about my pension and SCAVCs?
You can contact the Gwynedd Pension Fund:
- Email: pensions@gwynedd.llyw.cymru
- Telephone: 01286 679982
Please note that neither the Gwynedd Pension Fund, your employer nor the Local Government Pension Scheme is able to provide advice on the suitability of SCAVCs. If you are unsure whether a SCAVC is suitable for you, you will need to seek independent financial advice from your preferred financial adviser.