Can I transfer an AVC into an ISA?

21 May 2013


I have a very small Additional Voluntary Contributions (AVC) account with Standard Life Sterling Pension fund. This increased from £3,275 in 2011 to £3,285 in 2012 – that is, by 0.31%. The growth rate in the statement is 3.5%. There is no explanation for the difference in the annual statement. Is it possible to open a personal pension plan and transfer this into it or transfer it into a stocks and shares ISA?


Standard Life's Sterling Pension fund effectively invests in cash and was the subject of some controversy when it fell by 5% during the 2009 banking crisis.

Standard Life has since reimbursed investors for the loss but investment returns remain negligible in this low- interest rate environment.

Standard Life's factsheet suggests the fund returned 1.2% over 2012, assuming an annual charge of 1%, which doesn't tally with the figures you have. It may be your AVC charges more than 1% a year, but I think that's unlikely. It would certainly be worth double-checking your statement with Standard Life as it doesn't add up.

Pensions cannot be transferred into ISAs but your AVC can be transferred into a personal pension, including stakeholder and self-invested pension plan (SIPP), provided your occupational pension scheme rules allow it.

However, if you're planning to remain in a cash fund, I'm not sure the effort would be worth it, as returns on this type of fund are universally low at present.You might consider corporate bond or stockmarket funds that offer potential for higher returns, depending on how much risk you're comfortable taking and how close to retirement you are.

What are AVCs?

Additional voluntary contributions (AVCs) are an effective way of increasing your workplace pension and boosting your income in retirement.

An AVC is a top-up pension that sits alongside your company pension and is administered by your employer. You receive tax relief on your contributions and, if you move jobs, you can apply to transfer your AVC plan to your new employer. But if you are not allowed to do this, you will need to start a new AVC plan.

The benefit of company schemes is the company is likely to cover the charges. AVCs can be a good way to make up lost ground if you started saving late.