Notional Service and AVC's

L

Lara

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71
Hi
I'm 35 and have worked in the public service (healthcare professional) since 1998. However, I took a break for almost 3 years (to private sector) and have just come back. I left my superannuation contributions in place and made no contributions to any private pension during my time in private sector.

Since I've come back, I've been trying to decide what I should do regarding the 3 year out period and the fact that I only started working at 28-which now means that technically I'm 6 years off a full pension (if I work full time to 65 from here in).

I asked the HR officer what I should do and the best options were (a) AVC's or (b) Notional Service to be paid for the 3 years I took time out. I was told that buying Notional Service was considerably more expensive than the contributions I would have made under the normal Super Ann scheme and that I might be better off paying into an AVC but that was the extent of the advice they could give me.

Consequently, I don't know what way to go and the previous thread on this topic seemed to be encouraging Notional Service pay in but if its more expensive is it worth it? (The officer was unable to tell me how much more expensive Notional would be).

Also for the missing 3 years before I started (age 25-28) can I pay Notional Service? If not is AVC best option?

Thanks for any help.

Lara
 
Hi Lara,

Is your employer the HSE or is it some other part of the Civil or Public Service?

aj
 
Hi
Was told today- that notional service payments were almost prohibitively expensive? Is this true?

L
 
Hello there Lara,

In my opinion you should definitely go for the purchase of notional service and start ASAP. Cost depends on the number of years you need to purchase and your age when starting to pay. For example, if you wait till you're 40 it will cost more. Yes, it will cost more than the usual 5% superannuation but beats anything you can buy via AVCs. Reason is public service pensions are index linked unlike AVCs. Also the extra years will boost your tax free lump sum when you retire.

Furthermore, the contributions are tax deductible - 42% if you're in that bracket. You inform revenue you are buying notional service and you get extra credits on the tax cert. Sounds like you need to buy six years to bring you to full pension - half salary at retirement.

Incidentally you should check out if the years you worked in the private sector are reckonable for pension. If you paid superannuation it's quite possible they are. From personal experience, I wasn't exactly encouraged to buy notional service when I enquired which could be due to the fact that the employer also has to contribute!

Sherib
 
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