# AVC - good idea for me?



## peanuthead (30 Mar 2015)

Hi
We had a cornmarket rep in our school last week and he mentioned the idea of an AVC to me

Are these a good idea? The basic info I got was that it's saving money at high interest - 40%. You can't cash out til retirement. 

To be honest, I try my best, but I really don't understand finances etc.  

Details of my situation are: I'm a post 2004 teacher, I started teaching in 2007 but was teaching unqualified until 2010.  The Cornmarket rep tells me that I would have to work until 66 to reach a full pension.

I am a CID teacher.  I have a small amount of savings (under 10k) and other than the Superannuation deductions taken from my salary, I have no other savings towards a pension.
I am 31.

To be fair to the guy at Cornmarket, he did explain the % fees and something about how, for the first year they frontload the admin fees so that not all of the 40% will go towards my 60% for this year... I don't know if I have understood that correctly or not.  He did give me a booklet containing loads of information, but I'm just still not sure if I'm doing the right thing or not.

In the end I went ahead with setting one up.  I opted for the minimum amount, which won't break the bank of course, but is there any point in it then? It takes two months to set up so won't come into effect until May.

Can anyone give me any advice on the matter?  I had posted a thread on a different forum but was directed here as the advice is better.

Thank you in advance
peanuthead


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## PaddyBloggit (30 Mar 2015)

I did the same as you but have now stopped all contributions. The fees are high and still are costing me a fortune maintaining it. I took the max out when allowed under budget changes and invested it in house renovations.

I was hoping to retire at 57 but have taken on a second mortgage which will keep me working until 65 so that is a factor in me not reactivating my AVCs. 

Cornmarket gave me the spiel about tax efficiency but that all relative to your situation.

I kept the Salary Protection going but don't miss the AVCs. With all the pay cuts/bills etc. all my disposable income is well accounted for.


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## trasneoir (31 Mar 2015)

peanuthead said:


> something about how, for the first year they frontload the admin fees


 The rep you were talking to - quite a lot of your first year's contribution will be in his commission cheque at christmas. He's probably a nice guy, but he is well paid to sell you their products, and there are better options available to you. Cornmarket's name is mud around here - I suspect that there are _much _better options available.



peanuthead said:


> The basic info I got was that it's saving money at high interest - 40%.


 That's not correct. Pensions get tax relief at about 40%, so sacrificing €60 of take-home pay will get you about €100 worth of pension investments. This applies to any kind of pension, not just this company's AVCs.



peanuthead said:


> To be honest, I try my best, but I really don't understand finances etc.


That's going to change . You have invested _thousands _of hours of study to get qualified. Even as a teacher () you will spend _tens of thousands_ more hours earning your money. _You owe it to yourself_ to spend some time and energy learning to use that money efficiently. Once you've learned as much as you can on your own, hire an adviser to teach you more. You're not going to open your wallet again until you understand the investment (and the alternatives) inside out, so he'd better be a competent teacher.


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## peanuthead (31 Mar 2015)

Okay. I am going to learn.  I want to learn, I really do, but I find it so hard to wrap my head around all of this stuff.

Paddy Bloggit - what do you mean when you say it was costing you a fortune to maintain the AVC? Do you mean the contributions? Or do you mean that it costs me money to save this money with them? 

I really need to read the documentation he gave me again.... I was under the impression that this was a good move in terms of saving. 

I did only put in the minimum so we're not exactly talking millions here, but still...

The resounding feeling is that there are definitely better options out there - but what are they? I'm just going to Google AVC brokers but if that's the wrong thing to do please let me know.

Also, is it too late now that I have signed up with cornmarket? Do I just have to stay with them? Or can I freeze that one and start again with a different company?

im sorry if my questions are ridiculous, I'm very much on my own re: all of this, I have no family or peers that can help to advise me on this and I really don't fully understand it myself.


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## PaddyBloggit (31 Mar 2015)

It costs a nice whack each year in fees to maintain the fund. 

If in doubt over Cornmarket stop the process and tell them you've changed your mind. Educate yourself first, then decide.

The big sell of the contributions being tax effective is only a big sell .. who knows what will happen down the line re. tax reliefs.

Even though I'm contributing to a pension fund and have a stopped AVC fund I'm very fearful that there will only be a small pension pot before me when I retire. My hope is that I can sell a property (or two if needs be) to fund my retirement if the pension doesn't cut it.

The reality is can you afford AVCs with all the pay cuts we've been hit with? Would you not be better off saving into the Credit Union or elsewhere so that you have access to a rainy day fund if you even need it.

Sometimes I think we think too hard about the future and forget that we still have to live in the present.

I signed up to Cornmarket as a green, raw recruit - AVCs and Salary Protection. There are other companies out there/other options but AVCs aren't my priority so I haven't investigated them.


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## Gerry Canning (31 Mar 2015)

Peanut head.

1. You already have a rainy day fund of k10,= well done..
2. Since AVC,s and pensions attract very good tax relief , it should be a cheap way of saving.
3. Probably by your retirement age ,pensions will be changed to 68?, so makes sense to have a little extra pot.
4.Avoid (like the plague) salary protection type policies, unless you can get a competent independent advisor to advise you.
5. Your AVc pension pot may well be small when you retire , but remember your normal pension may just be adequate, so even an extra 20 a week then will be the difference between survival pension and a bit of comfort.
6. Something like 50% of private employees have nil pension provision other than State old age pension.Your Teachers pension may today be considered good but it is taken from Day to Day taxes ,ie the state has NOT saved your contributions,I just wonder will State Pensions be able to be funded ie paid out in 35 years time.
At least Your AVc is your money.

Paddy Bloggit.
You might rely on selling a house, not sure that makes sense ,unless its one you didn,t have to pay mortgage on?
Otherwise you are paying mortgage on after tax income ,whilst not getting the present very good tax relief on pension contributions. 
I do appreciate that rules can and will change and  I would be a fan of AVCs but would strongly advise get Independent advice.


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## PaddyBloggit (31 Mar 2015)

Gerry,

I'll have my pension when I retire plus the pot of what's in my dormant AVCs. I'm paying a mortgage on a house that I'll downsize to when I retire and I have two other properties that are mortgage free which should hopefully sweeten the pot a little.

Re. the Salary Protection. I have it and I think it's well worth my while having it for what it is costing me per month. I could be spending it worse. If I get sick in the morning and I'm out on my ear at least I'll have that to fall back on.

_"Your Teachers pension may today be considered good but it is taken from Day to Day taxes ,ie the state has NOT saved your contributions,I just wonder will State Pensions be able to be funded ie paid out in 35 years time."_​
That's my biggest worry ... no money in the pot for my pension when I retire.


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## trasneoir (31 Mar 2015)

peanuthead said:


> Also, is it too late now that I have signed up with cornmarket?


No. I _believe _you have a cooling off period where you are entitled to a 100% refund of anything you have paid (or comitted to). That period may be short, so I'd get on it today.



peanuthead said:


> Do I just have to stay with them? Or can I freeze that one and start again with a different company?


Worst case scenario: you stop contributing to the cornarket avc, and write off whatever you have given them so far. You can always set up a PRSA somewhere else.


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## Orbit (31 Mar 2015)

Gerry Canning said:


> 4.Avoid (like the plague) salary protection type policies, unless you can get a competent independent advisor to advise you.


 
Why do say this ?
For the past few month I’ve been doing my research on "income protection vs critical illness" cover. I'm very close to taking out a small income protection policy.. I was of the opinion that they are very good type of insurance against any illness that might render me unable to work between now(age 40) and retirement age. Plus you get tax relief on the premium at the marginal rate.
Are we talking about the same thing ?

Salary Protection* helps you to protect your salary against the impact of long-term illness, providing you with a replacement income** should you fall ill and find yourself unable to work as a result.


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## PaddyBloggit (31 Mar 2015)

trasneoir said:


> Worst case scenario: you stop contributing to the cornarket avc, and write off whatever you have given them so far. You can always set up a PRSA somewhere else.



Better off to cancel it fully as Cornmarket will charge you a fee every year for maintaining the fund. You may freeze/stop the fund but Cornmarket will still have their take annually.


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## trasneoir (31 Mar 2015)

Orbit said:


> Why do say this ?
> For the past few month I’ve been doing my research on "income protection vs critical illness" cover. I'm very close to taking out a small income protection policy.. I was of the opinion that they are very good type of insurance against any illness that might render me unable to work between now(age 40) and retirement age. Plus you get tax relief on the premium at the marginal rate.
> Are we talking about the same thing ?


It's a great idea in principle - for most of us, our ability to work is our biggest asset, so insuring it makes sense. I suspect the reservation is that some of the products in this domain are useless: full of fine print to the point where it's almost impossible to make a successful claim. These policies aren't cheap - I'd want to be really sure that it offers value and that it'll actually pay up if I need it.


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## Gerry Canning (31 Mar 2015)

trasneoir said:


> It's a great idea in principle - for most of us, our ability to work is our biggest asset, so insuring it makes sense. I suspect the reservation is that some of the products in this domain are useless: full of fine print to the point where it's almost impossible to make a successful claim. These policies aren't cheap - I'd want to be really sure that it offers value and that it'll actually pay up if I need it.


ORBIT.

Had nurse with salary protection via Cornmarket salary protection product.
She was retired early on Health Grounds from HSE, Cornmarket/Irish Life would not pay out.
It took 6 months ! to get it paid.

This may have been an unusual one but I doubt it.

..........................................................................
My strong advice is to go to a competent financial advisor ,preferably an independent one and take their advice.

The problem with Insurance Wording is that your perception of what something means may not be what you sign for. eg, it is now very hard to claim on what laymen consider Heart Attacks, quite a few Cancers are now excluded eg ,some skin cancers; that can be good in that these illnesses are now considered non life threatening and eminently treatable.
Still would be an awful gunk if you thought you were covered.

I suppose Buyer Beware holds.


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## Steven Barrett (31 Mar 2015)

Gerry Canning said:


> Irish Life would not pay out



There are now 5 providers of income protection in the Irish market. Irish Life's product is by far the worst of the lot. I would be confident that the people selling this product to public servants have never read the terms and conditions of the product and have no idea of any of the hidden terms contained in them.

Steven
www.bluewaterfp.ie


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## Gordon Gekko (31 Mar 2015)

Did you have scope for notional service purchase?

I'd cancel this ASAP while you're still in the cooling off period.


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## peanuthead (31 Mar 2015)

Thanks for replies.

The rep said that notional service wouldn't apply to me as I will have 40yrs done by aged 66. 

however, what if I want to retire earlier? Would the notional service be a better idea then? 

I think I will cancel the AVC and have a think about this. Can I buy back years in order to retire earlier than 68 or if I am to reach 40yrs before 68 am I not entitled to buy back anything But have to wait instead?


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## Fisherman (31 Mar 2015)

We had dealings with Cornmarket in the past....our perception was  that they were more interested in what was best for Cornmarket (rep). Whilst they are a reputable co.... get a second opinion....


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## peanuthead (31 Mar 2015)

Thank you.

I have emailed the rep to cancel the AVC. In the meantime I have contacted an independent financial advisor. Is it advisable to speaker to more than one?


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## PaddyBloggit (31 Mar 2015)

I'd stick a letter in the post to them too.


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## peanuthead (31 Mar 2015)

Will do.

First thing in the AM


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