# Making AVC-PRSA contributions while retired?



## Protocol (26 Aug 2010)

Scenario:

Worker has retired from public service in mid-2008 with DB final-salary pension.

Worker has had an AVC since 1992 (broker is Cornmarket).  At retirement, the AVC was transferred into an ARF, from which a small annual income is drawn.

There is also a second AVC, taken out with a discount broker in 2006.  The worker made contributions during 2006, 2007 and 2008.  No ongoing contributions have been made since retirement.

This PRSA-AVC is paid-up, but not yet transferred into an ARF.

During 2008 and 2009, the person works part-time with the same employer.  There is also some small self-employed income.  So there is wage income of approx 12000 during 2009.

*I assume it is ok to make a lump-sum PRSA-AVC contribution to reduce the 2009 tax bill?*

*The idea would be to subsequently transfer the PRSA-AVC into the existing ARF??*


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## d53 (27 Aug 2010)

If you look at the Revenue FAQs posted on a parallel thread, question 2 deals with tax relief.  This says:

"Relief is allowed against relevant earnings, i.e. earnings from a trade, profession, office or employment. Earnings as a proprietary director or proprietary employee of an investment company are not relevant earnings. Net relevant earnings are relevant earnings less losses, capital allowances and certain payments which reduce a person’s income for tax purposes such as tax effective convenants."

Therefore, the worker will not get tax relief unless he/she has a source of taxable earnings.  Even in this case, there are limits to the amount of tax relief available.

d


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## Protocol (27 Aug 2010)

Thanks for your reply.

The worker has normal wage income (from the same employer) and other wage income (from an associated employer).

There is also some small self-employed income from a "trade".

These three incomes add up to maybe 13k gross. The plan is to make a 5k contribution to the PRSA-AVC, so as to reduce the income tax bill.


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## LDFerguson (30 Aug 2010)

Although PRSA AVCs must have the same retirement age as the main scheme, it's increasingly common for them not to be drawn to avoid the imputed distribution tax on ARFs.  But I doubt if you could still claim tax relief on further contributions.  Apart from anything else, you'd need to tell the PRSA provider that the contribution is no longer an AVC, but a contribution from someone in non-pensionable employment.  

I think it might be more straightforward if your person just started a new PRSA in respect of the earned & self-employed income.


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## Protocol (31 Aug 2010)

Thanks for your reply.

The worker in question is a public servant, who could retire at any stage between 60 and 65.

I suppose the Normal Retirement Age is 65.

He actually retired in 2008 aged 62, and rec'd the lump-sum and pension as expected, as well as converting the original Cornmarket / Irish Life AVC to an ARF.

The Eagle Star PRSA-AVC has a normal retirement age of 65 on the policy. This policy rec'd conts during 2006, 2007 and 2008.

He returned to work with the same employer on a part-time contract basis, and also on a casual basis, during 2008/2009.

So the plan is to make AVC to the (paid-up??) PRSA-AVC based on the wage income during 2009.


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## LDFerguson (1 Sep 2010)

As he's no longer in the main scheme since 2008, the fact that he's currently working for the same employer is of little relevance.  In effect he retired and began again.  

So he wouldn't be making AVCs any more, as any new contributions would not be "Additional".  At a minimum, Zurich Life would need to be notified that his AVC PRSA is no longer an AVC PRSA but he still wants to make contributions in respect of post-retirement employment.  They'll have the final say but my guess is that they won't allow contributions from what is in effect two or more seperate employments to be made to the same PRSA contract.


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## Anfear (6 Sep 2010)

Might be worth checking if the tax relief on possible contributions to PRSA from the 'contract employment' now exceeds the potential tax liability when drawing the benefits down? If tax relief now only equals tax liability on drawdown, no real advantage, when you consider setup & ongoing charges? Appreciating of course, once within a prsa the investment rolls up tax free, but not a huge advantage over short to medium term?


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