AVC PRSA to increase lump sum at retirement

Clohass

Registered User
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Hi

I understand it is possible to use an AVC PRSA to increase Retirement Lump sum but I was wondering what the rules/limits around this are.

I understand that it is possible to get a lump sum of 1.5 times salary tax free at retirement but I think this is after a min of 20 years.

if Someone had only 15 years service can the same be done if the Lump sum from Employer only equated to 60% of annual salary or are there lower limits if service is less than 20 years?

Also are there limits to the % of an AVC PRSA that can be used to fund this lump sum or can 100% of the AVC PRSA be used if the total lump sum is less that 1.5 times salary(utilising bothe the lump sum from employer and 100% of AVC Value).

Hope my 2 queries are clear and thanks in advance for all replies.
 
In a DB scheme your max lump sum is 150% of Salary subject to having a minimum of 20 years service. However Salary is your gross taxable including bonuses etc. however your pension scheme is probably based on basic salary. So using AVCs to increase your retirement lump sum is very tax effective.
If you have less than 20 years service then your max lump sum is reduced. But even still there may be a gap between what your scheme pays and what are Revenue limits. Again using AVCs to fund the gap is sensible. And if that means all the AVC fund is so used, that's ok.
 
Thank you v much Conan for taking the time to post.

Do you know if there is a reference table or formula for the allowable lum sum. For example if Overall Salary was 40k and lump sum from employer after 12 years service was 20k. What amount could an AVC PRSA Fund to be available as tax free lump sum in these circumstances?
 
If you will have 12 years service by retirement, then the Revenue maximum lump sum is 48/80ths of Final Salary (basically gross taxable salary). Your scheme rules however may be different. It might only give you 3/80ths for each year of service (36/80ths) and it may only apply to basic salary. That's where an AVC fund might come in useful in bridging the shortfall. So you could get tax relief on the AVC but get it all back as a tax free lump sum.
 
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