# Distinction between funds from AVC's and funds frm the main Employer sponsored scheme



## apd (7 Sep 2005)

In my previous employment the company paid 7.5% of salary to my pension scheme. I contributed 15% myself (the max for my age limit). 

None of my 15% was treated as AVC. My understanding at the time was that an AVC was a yearly lump sum payment to enable people to bring their yearly contribution to the max tax free limit. 

my current employer pays 7% and i pay 15%. however, the 8% more that I pay than my employer is treated as AVC every month.

In the pension statements AVC are always listed seperately in the fund, which seems to confirm my belief that come retirement age access to AVC contributions is treated differently than the main fund. Is this true? If so, how? 

Is this payment structure correct?


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## Conan (7 Sep 2005)

*Re: Avc*

In terms of your options at retirement, there is a distinction drawn between funds from AVC's and funds from the main Employer sponsored scheme (including normal Employee contributions).
Your main scheme benefits at retirement must be taken in the form of an annuity (after you take any tax-free lump sum entitlement). The annuity gives you a guaranteed income for life.
However with the AVC fund you have a choice of either buying an annuity or investing into an Approved Retirement Fund (ARF). With the ARF you have more flexibility in that you can decide what income (if any) you wish to draw down from the ARF. Any income draw down will be taxed in normal way.


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## RS2K (7 Sep 2005)

*Re: Avc*

Yes, but from a planning viewpoint all employee contribs. would be better made as AVC's.


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## asdfg (7 Sep 2005)

*Re: Avc*

You personally can contribute up to 30% of salary incl BIK if any for tax relief purposes. The employers contributions as far as I am aware are not taken into account for calculating tax relief purposes. 
You could set up a seperate AVC to diversify investments. 
You can also contribute 30% of salary and offset against last years income prior to 31/10 or 15/11 through ROS. Don't forget about the PRSI element.     
Remember monthly fees, bid offer spread, annual fees etc


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## apd (7 Sep 2005)

*Re: Avc*

thanks for the replies. unfortunately this concept of splitting someones pension fund in this was make no sense to me whatsoever.

If you can transfer a portion (ie. your avc fund) to an ARF why not the entire amount. who would really want to split their retirement fund at 65 into an annuity and also an ARF. you would just end up paying twice as many fees.


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## asdfg (8 Sep 2005)

*Re: Avc*



> If you can transfer a portion (ie. your avc fund) to an ARF why not the entire amount. who would really want to split their retirement fund at 65 into an annuity and also an ARF. you would just end up paying twice as many fees.


 
Most fees as far as I'm aware are based on percentages.


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## TRS30 (8 Sep 2005)

*Re: Avc*

Could someone please clarify how you tell the difference between employee contributions and AVC’s?
My company pays 10% of salary and I pay 20% monthly through out the year. This is the max amount that I can put in to claim tax relief.
Is my 20% all employee contributions, all AVC’s or mix of both? If both how do you work out which is which…..
Thanks in advance


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## bacchus (8 Sep 2005)

*Re: Avc*



			
				TRS30 said:
			
		

> Could someone please clarify how you tell the difference between employee contributions and AVC’s?
> My company pays 10% of salary and I pay 20% monthly through out the year. This is the max amount that I can put in to claim tax relief.
> Is my 20% all employee contributions, all AVC’s or mix of both? If both how do you work out which is which…..
> Thanks in advance


 
On my various contracts over the years, the rule was that the employer would contribute the same amount as myself with a max of say 7%.
So, if i  put in 7%, they put in 7%. Then, any contributions i have made over my "contractual" 7% have always been considered as AVC.
There is no diff between my 7% and my AVC...same fund, same perf, same mgmt fee, same everything...
i do not why pension company always split employer/ee contribution and AVC.


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## asdfg (8 Sep 2005)

*Re: Avc*

Generally the rules state the min amount that each has to pay. (Generally 10% employer  10% employee or some other mix. This is considered the main pension. Anything else is considered an AVC. Bit confusing but I think it came about when the employer paid the pension contributions in full. Very few pensions are like this now.


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## LDFerguson (13 Sep 2005)

*Re: Avc*

If your contributions to an Occupational Pension Scheme are deemed regular Employee contributions, you cannot invest them in an Approved Retirement Fund when you retire, unless you are a director.  

If your contributions are deemed Addiional Voluntary Contributions (AVCs), you can.  

Liam D Ferguson
www.prsacentre.com


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## TRS30 (13 Sep 2005)

*Re: Avc*

Liam,
Anyway of knowing without asking ?


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## ClubMan (13 Sep 2005)

*Re: Avc*

I'd imagine that the annual statement should clarify the class of each contribution. Just curious as to why one would be reluctant to ask?


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## TRS30 (13 Sep 2005)

*Re: Avc*

Not relucant at all, just didnt have statement to hand and HR can be a bit slow with queries like this so though would get answer quicker on here  

Will check statement later.


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## LDFerguson (13 Sep 2005)

*Re: Avc*

Your payslip _might_ distinguish between ordinary employee contributions and AVCs, but many don't - simply itemising everything under "pension" or some such generic heading.


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