AVCs for Public Servants

oysterman: going by some of the previous posts and assuming lucyg qualifies for 150% gratuity and 50% pension this is now deemed to be 59.4%. does this mean that he could fund an avc/arf to cover the 7.2% that would bring his pension up to a theoretical 66.6% ( actual 57.2%)?
 
Can I summarise the findings here in relation to funding for an enhanced public sector pension and tell me if I am wrong?

I will have full service, 40yrs, at my retirement age, 60. Therefore I will receive a pension of 50% and a lump sum of 150%. However, I can take out a PRSA and benefit from the tax relief at 42%. If I do and the fund grows to, say, €200k over the next 15 yrs - I can only draw down 7.2% of final salary from that fund each year - the rest remains in an ARF? Is this so? what if I want to take a lump sum from the fund which would be way over the 66.6% - what repercussions would that have for me?

Slim
 
cuchulainn said:
oysterman: going by some of the previous posts and assuming lucyg qualifies for 150% gratuity and 50% pension this is now deemed to be 59.4%. does this mean that he could fund an avc/arf to cover the 7.2% that would bring his pension up to a theoretical 66.6% ( actual 57.2%)?
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I think it's all down to what the Revenue deems to be the pension equivalent of money taken as a lump sum. It appears they may be taking a more generous view of this at the moment - but I would guess that their view is based on annuity rates....if they rise again then the 150%/50% split could be deemed to be closer to the 66.6% limit and the scope for AVCs to benefit a full-service public servant could disappear.
 
so what happens if you go ahead with AVCs and you work 40 years in the public service for full pension? Is it just a case of the AVCs being taxed or something?
 
Yeah, I think so.

In a sense you win either way - potential tax advantage if you do end up taking early retirement or, if you go to full service, a nice (albeit taxed) nest egg.

Either way, if you hadn't taken out an AVC plan what's the betting the money would have been spent along the years?

But it must be said that if you end up having to pay higher rate tax on all your AVC funds because you've exceeded Revenue limits, then the sort of extortionate fees that are all too common in this sector won't have been offset by a tax advantage and you'd probably have been better off frittering it away across your working lifetime.

I must confess to being one of those paying highway robbery charges on my AVC - in mitigation, it was taken out nearly a decade ago when I was less concerned about such issues and discounted charges seemed to be unheard of.....I'm definitely going to switch this year and will report on my progress.
 
What would be the best option for someone who is contributing to a public service superannuation fund but who is short of the necessary years to retire on full pension (at 65)?

I am currently short 3 years & 88 days for maximum service of 40 years at age 65. I have been given the option to purchase notional service to purchase the shortfall at a rate of 0.382% of gross pay and 2.807% of net pay. This equates to a pay deduction of €81.53 per month or €45.66 after tax every month until May 2037. This payment will rise as my salary rises.

This sounds like a lot to pay for the extra years.

Would I be better investing in a PRSA instead to make up the shortfall in pension?
 
Oysterman,
For the sake of clarity, you cannot just start an AVC on the principle that if you overfund then the AVC fund becomes taxable.
The regulations require the AVC provider to calculate whether the individual has scope to fund additional benefits. This facility cannot be based on the possibility of early retirement. The individual either has current benefits less than Revenue limits (based on retirement at Normal Retirement Age) or not.
If there is scope to fund additional benefits then the level of AVC can only be sufficient to bridge the benefit gap (based on standard industry assumptions). All calculations must be based on retiring at Normal Retirement Age.
 
Conan,

Conan said:
The regulations require the AVC provider to calculate whether the individual has scope to fund additional benefits. This facility cannot be based on the possibility of early retirement. The individual either has current benefits less than Revenue limits (based on retirement at Normal Retirement Age) or not. .
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This has not been my experience in practice.

I am a serving Civil Servant and will have max pension service (40 years) at minimum retirement age of 60. I intend to retire early at 50 under the terms of Circular 10/2005 - Cost Neutral Early Retirement.

My pension provider has allowed me to set up a PRSA-AVC to cover the difference between my actuarially reduced pension on early retirement and the Revenue limits.

SPM.
 
Having read all the above, I'm resurrecting this thread to ask if a definite answer has ever been provided to the big question posted here? Can you or can't you "top up"? Did anyone find out for definite?

The reason is that I got a letter yesterday from "Personal and Corporate" Financial Services (A link to them is posted here but now out of date) and blurb includes the statement; "Even people with full 40 years service can benefit from an AVC adn are eligible to fund up to 2/3rd of final salary as a pension/ARF.
 
The last page of this Eagle Star leaflet on “[broken link removed]” should be of some help.
 
There now appears to be huge scope for AVCs as mentioned in other threads recently - I've recently significantly increased my AVC provision (having moved to a 0%/1% provider) and there was no problem despite the fact that I'll have full service (including notional service) by 60.
 
Oysterman you say:
I've recently significantly increased my AVC provision (having moved to a 0%/1% provider

Can anyone move their AVC? Is there a penalty involved? Who is your new provider?
My postion is slightly different to others in that I joined the public service in 2000 in my twight years - due to retire in 2015. I inquired about purchases years but was told it would be prohibitively expensive. Instead the union engaged Marsh who act on behalf of Hibernian and I took out an AVC plan with them. charges are calculated at 5%. The contributions go into a Bond Fund and Focused Managed. I'd like to increase my contributions but would prefer to know if I can move and avail of a better rate.
 
Paddylast said:
Oysterman you say:
I've recently significantly increased my AVC provision (having moved to a 0%/1% provider

Can anyone move their AVC? Is there a penalty involved? Who is your new provider?
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I had a 5%/1% AVC with contributions made from salary to Irish Life.

I've taken out a PRSA AVC with Eagle Star (brokered execution-only by LA Brokers). I have to sort the tax myself but am happy to do that to save the 5%.

Since both providers take a 1% management fee I haven't explored moving my existing (paid up) IL fund to ES - I'm happy to have a couple of funds to spread the risk.
 
Any surplus Avc funds are put into an ARF. Money can be withdrawn from this at any time after retirement and will be taxed at your marginal rate. This is allowed on top of the maximum Revenue allowed pension.
 
You should probably contact one of the Discount Brokers listed in this post for an 'Execution Only' service
 
I may have missed something in this discussion & other similar threads, so excuse me if this question has already been answered.

  • Public Sector: max pension of 50% of Salary (1/80th for each year of service) PLUS a tax-free lump sum of up to 150% of Salary (3/80ths for each year of service)
  • Private Sector: max pension of 2/3rds of salary (1/60th for each year of service) with the facility to commute part of this pension for a tax-free lump sum of up to 150% of Salary.
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You are allowed 50% of salary plus 150% lump sum. In the private sector, the 50% of salary would NOT include social welfare pension - so you can have 50% of salary PLUS you also get your sw pension.

A Class A Public Sevant gets a pension of 50% of salary MINUS the sw rate of pension pension. Whereas the total amount of money they get into their hand each pay day on retirement is equal to 50% salary, a large portion of this is not their work pension (as it is paid by SW on foot of PRSI contributions).

So, shouldnt a Class A Public Sevant be allowed have AVCs to top up to 50% of salary PLUS sw pension?
 
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