# AVC-types of contributions



## francescoli (3 Jun 2020)

Hi I'm looking for some advice please.

I joined the public sector in 2005 and I'm 38 now.

I've recently started thinking about starting an AVC.Cornmarket are the approved provider with the employer but id go with any provider once its not much hassle.

Cornmarket charge €595 consultancy fee and 1% AMC.
It also mentions a contribution fee of 4% for each single premium contribution and 0% for each regular contribution.
Whats the difference between the 2 types ?

Am I correct saying 100% of my weekly/fortnightly contributions will be invested  and ill only be paying the 1%  AMC fee after I pay the €595?

I will have 40 years service when I'm 62 ,if I retire early can I take a lump tax free or is it unlikely to be much of a sum unless I go before my 60s?

If I go with some provider other than Cornmarket will it be execution only as I would prefer something that I can get advice as id have no idea about these things.

I have 20k sitting in a savings account that I need to do something with but also not sure my best course of action .

Any advice would be appreciated.


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## LDFerguson (3 Jun 2020)

francescoli said:


> Cornmarket charge €595 consultancy fee and 1% AMC.
> It also mentions a contribution fee of 4% for each single premium contribution and 0% for each regular contribution.
> Whats the difference between the 2 types ?



The regular contributions are the ones that you would make through salary fortnightly.  A "single premium" is a once-off contribution. 



francescoli said:


> Am I correct saying 100% of my weekly/fortnightly contributions will be invested and ill only be paying the 1% AMC fee after I pay the €595?



Based on what you've posted above, yes. 

For what it's worth, in my opinion 100% investment and 1% annual charge is good for an AVC.  The 4% charge on single contributions is pricey. 



francescoli said:


> I will have 40 years service when I'm 62 ,if I retire early can I take a lump tax free or is it unlikely to be much of a sum unless I go before my 60s?



Your lump sum is calculated based on a reduced salary figure ("pensionable salary") that takes account of the State Contributory Pension.  Revenue will allow your lump sum to be calculated based on your actual salary (including some non-pensionable elements, if applicable.)  Your AVC can be used to bridge the gap between the two. 



francescoli said:


> If I go with some provider other than Cornmarket will it be execution only as I would prefer something that I can get advice as id have no idea about these things.



It doesn't need to be execution-only.  You can get advice from any Financial Broker.  If you go with a provider other than Cornmarket, you'll pay the AVC gross from your bank account and apply for the tax relief from Revenue.  Cornmarket have facilities to deduct the AVC at source on your payslip and arrange immediate tax relief at source. 



francescoli said:


> I have 20k sitting in a savings account that I need to do something with but also not sure my best course of action .



For that one, you will need to get advice that looks at your overall financial circumstances, income and outgoings, assets and liabilities, future plans etc.  Maybe some of this money could be put into an AVC; maybe there are other things that would be more suitable for your particular circumstances.  Or you could post in the Money Makeover section here on AAM and you'll probably get excellent advice for free.


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## francescoli (3 Jun 2020)

I appreciate the reply.
The €595 fee isn't great but if I'm paying into it for 20 years + then its no big deal once I'm only paying the 1% AMC .
I won't be paying in any lump sums I dont think so will only be the fortnightly contributions. 

Sorting out my own tax once a year if I didnt go with Cornmarket wouldnt put me off looking elsewhere tbh.That should be straight forward ,I presume the provider just gives you a document to show revenue the contributions. 

Thanks for mentioning the Money Makeover section,I'll take a look there.


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## Early Riser (3 Jun 2020)

francescoli said:


> I will have 40 years service when I'm 62 ,if I retire early can I take a lump tax free or is it unlikely to be much of a sum unless I go before my 60s?





LDFerguson said:


> Your lump sum is calculated based on a reduced salary figure ("pensionable salary") that takes account of the State Contributory Pension. Revenue will allow your lump sum to be calculated based on your actual salary (including some non-pensionable elements, if applicable.) Your AVC can be used to bridge the gap between the two.



That is not quite right. 
Your lump sum is calculated on your pensionable salary, which is normally your final salary averaged over your three final years. Say the salary for your post at retirement is €70K - Then the lump sum after 40 years is €105,000. At 62 you would be be taking Cost Neutral Early Retirement, so this figure would be actuarially reduced to about €99k. There would really be little room for substantial extra tax-free lump sum from an AVC with 40 years of service.

Your main option would be to convert your AVC fund into an ARF and draw this down as taxed income to top up your Occupational Pension. This would be particularly useful to you in the years between 62 and 65 to "bridge the gap" beween retirement and eligibility for either a State Pension or a Supplememtary Pension. Again, taking a salary of €70K. Your Occupational Pension after 40 years would be approximately €22K (€35K - €13K State Pension). This would be actuarially reduced under CNER to about €18.5k if retiring at 62, and you would not be entitled to the State Pension element (or Supplementary equivalent) until 65. You could draw from the ARF to compensate yourself for this. You could also continue to draw from it after 65, of course. But it is taxed as income.


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## francescoli (4 Jun 2020)

Thanks for the info folks.Ill start making a few calls today.

I'll probably go with Cornmarket unless I see a much better deal.Its only the €595 charge that is off putting but the direct payment and tax sorted via each payroll would be handy.


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## Marco 1972 (4 Jun 2020)

Interesting discussion, l am in the public service as well and have an AVC with New Ireland Assurance/Irish Pension Funds. l think it would be worthwhile getting independent advice as l found when l was inquiring it was convoluted etc especially now that the state pension is deducted from the total until you are 65/66/67.


Early Riser has given a coherent approach in their posting. Important to ascertain what percentage is taken as 'management fees' at the end of 40 years or whatever the no of years you are in the plan.

l also find it frustrating that in the era of online bank accounts and accessing them readily that l have to make phone calls/emails to access details of my fund. Think such saving accounts would be more popular if made more accessible and transparent.

As an aside it is possible to make a lump sum payment to an AVC if one comes into an inheritance or similar or can it only be to the max amount permissible in a particular yea.


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## Early Riser (4 Jun 2020)

Marco 1972 said:


> As an aside it is possible to make a lump sum payment to an AVC if one comes into an inheritance or similar or can it only be to the max amount permissible in a particular yea.



_"Relief for special contributions (or for a contribution not made under the net pay arrangement as in paragraph 3.3) is  given by way of adjustment to the employee's tax credit certificate.  *If aggregate contributions exceed the annual relief limit, relief will be given on a spread forward basis*"_ .


			https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-03.pdf
		


If the payment is made before 31st October it can be attributed to the previous year as well as the current year- with any balance carried forward.


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## I.P. Freely (4 Jun 2020)

Try a local broker on the fee issue. Most will recommend a pension product with Irish Life or one of the big providers anyway. Most will assess your appetite for risk and recommend a product based on your age and risk appetite. It is not that complicated really. I would imagine that it is the same small number of fund products that most people opt for every time - mid level of risk, balanced portfolio of investments. Local brokers will be more interested in you as a client versus bigger corporates imo. Irish Life offer a portal where you can see your fund value go up and unfortunately down, review your contributions etc. I assume most other larger pensions providers offer the same. 4% of the value of each AVC seems like an awful lot!!


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## Marco 1972 (5 Jun 2020)

Thanks for that, food for thought as they say,,,


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## Frebel79 (12 Jun 2020)

francescoli said:


> Hi I'm looking for some advice please.
> 
> I joined the public sector in 2005 and I'm 38 now.
> 
> ...



Hi Marco,
Did you stick with Cornmarket?
AMC of 1% is reasonable and handy to have contributions taken at source but...

Fund performance is very poor

Over last 5 years, the 3 funds PA are: 2%, 1.6% and .86% which are at minus when you include amc, consult fee and inflation.





						Fund Prices and Performance | Investment Funds Ireland | Irish Life
					

Get the latest fund price and performance information and download the latest factsheets for certain funds.




					www.irishlife.ie
				





I stand to be corrected here. I'm currently with Cornmarket as well but trying to figure out best PRSA option for me now.


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## Marco 1972 (12 Jun 2020)

Hi

To be honest l would have to do a bit of research to get up to speed on all this but l take your point. I think their plans/investments are balanced with regard to risks and what stage you are at, whether young or old. 

l dont even know if a person can move an AVC fund or release part of it before maturity.   

You have a point with the monetary return. Year on year,, l look at my print out and the increase in the AVC never really goes beyond the tax rebate allowable,,  my money might as well be in SSIA style arrangement.  Am l naive,  but expect at some stage they would have invested in something that had a very good return e.g. Apple or equivalent up and coming.. so that at least l could feel satisfied with the commitment l am making....

though l could mandate my fund manager to move more of my money into higher risk but higher return portfolios.....


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## frebel (12 Jun 2020)

Marco 1972 said:


> Hi
> 
> To be honest l would have to do a bit of research to get up to speed on all this but l take your point. I think their plans/investments are balanced with regard to risks and what stage you are at, whether young or old.
> 
> ...



I'm on the 'adventurous' fund which did yield 6.27% over the last 3 years but 2.05% over 5

In comparision, Vanguard funds have had a bad year so far but still performed 5.5% over 5 and 10% over 10 years

AFAIK you would have to leave funds where they are but could start up a new PRSA... Again, very much stand to be corrected


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## francescoli (12 Jun 2020)

Frebel79 said:


> Hi Marco,
> Did you stick with Cornmarket?
> AMC of 1% is reasonable and handy to have contributions taken at source but...
> 
> ...


How do Cornmarket compare to other funds ?
Are they very poor or just is that similar no matter who the provider is?


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## Frebel79 (13 Jun 2020)

francescoli said:


> How do Cornmarket compare to other funds ?
> Are they very poor or just is that similar no matter who the provider is?


I compared with vanguard in last post


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## francescoli (14 Jun 2020)

Cheers for that,I missed your info when I posted.


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## Conan (14 Jun 2020)

Cornmarket are merely Brokers/Advisors. They don’t manage funds themselves. Their fund choice is managed by Irish Life.


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