# Maximum benefit limits - pension board / revenue



## asdfg (5 Oct 2005)

from pension board website



> *Maximum benefit limits
> *All benefits paid from a company or statutory plan are subject to maximum limits set by the Revenue or by the relevant Statute. In summary, in a company plan these limits are:
> 
> A pension on retirement from service at normal retirement age of 2/3rds your Final Remuneration , if you have completed 10 years service, *or*
> ...


 

My understanding is that the max pension/lump sum payments allowed by revenue is a lump sum of 1.5 times salary and 2/3 of final salary. According to the above it is an *or* situation. 

Which is correct? Can you provide links to prove.
How is the reduced pension calculated if the above is correct


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## kirvos (5 Oct 2005)

Hi asdfg, 
My understanding is that if you take 1.5  times finishing salary plus some calculation for bonuses/overtime (depending on your scheme rules and Revenue approval) you do NOT get 2/3 of final salary as well. How we all wish.  Your pension is revised downwards by a formula (in the rules of the scheme) sometimes on a 9:1 basis. 
     For every €9 you take in cash, you lose €1 pension payments.  I know I'm right on the 'OR', i.e, a reduced pension, but not sure about calculation. I'm sure some other well-informed posters will help you.


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## Conan (6 Oct 2005)

The maximum total pension value is 2/3 rds of Final Salary. You can commute some of this pension for a tax-free lump sum and thus take a reduced pension. The maximum tax-free lump sum is 150% of Final Salary.
The pension reduction can vary from scheme to scheme but generally, the total pension is reduced by 1/9th of the lump sum taken.


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## asdfg (7 Oct 2005)

Thanks for the replies 
What happens where one takes the 1.5 times final salary from AVC contributions (the company may or may not be aware of these contributions) and  leaves the company pension at 2/3 final salary less state pension. 
How is the reduced pension calculated by revenue. Surly it is not up to the rules of the pension scheme.


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## Westbound (7 Oct 2005)

The Revenue rules provide for maximum benefits payable based on servcie and final remuneration. Pension schemes can pay out benefits up to these limits if the rules permit. In your case, the benefits are based on your pensionable salary (i.e. salary less the state benefit). You may also have other earnings, such as overtime or BIK which are not pensionable. These can be used to maximise your cash via AVCs. The main thing is to ensure that your total benefits do not exceed the Revenue Max of 2/3rds of your final remumeration (which is not necessiarly your pensionable salary). Your scheme will only pay the benefits that have been funded based on your pensionable salary, but you can try to maximise your lump sum as miuch as possible.


You can't have AVCs without the main scheme being aware of it.

Also, bear in mind that if you have any benefits from previous employers (retained benefits) these muct be taken into account for the purposes of determinng the maximum. ALL benefits, including retained benefits cannot exceed 2/3rds. For example if your Revenue max cash was €100,000 and you took cash from a previous scheme of €10,000, then you can only get €90,000 from the current scheme.


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## asdfg (7 Oct 2005)

> You can't have AVCs without the main scheme being aware of it.


 
See this extraxt from a post from here 



> Obviously your employer has full access to information about your pension arrangements that you make through the employer scheme. *However, if you choose your own PRSA AVC rather than your employer's arrangement, contributions to it are confidential between you, the broker and the chosen PRSA provider.*


 
highlights are mine


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## Marianne (8 Oct 2005)

When you come to retire, all interested parties will seek confirmation of your total retirement benefits.


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## asdfg (11 Oct 2005)

> What happens where one takes the 1.5 times final salary from AVC contributions (the company may or may not be aware of these contributions) and leaves the company pension at 2/3 final salary less state pension.
> How is the reduced pension calculated by revenue. Surly it is not up to the rules of the pension scheme.


 
I have seen figures mentioned between 9 to 14. Say, I take a lump sum of 60,000 this will reduce my annual pension by between 6,667 and 4,286.



> When you come to retire, all interested parties will seek confirmation of your total retirement benefits.


 
Why, my pension package is between me and revenue. I take it revenue will seek clarification from all interested parties. But how do revenue calculate the reduction in pension. The idea of taking out the PRSA AVC was that your employer is not aware of the existance of your addition pension scheme.


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## Marianne (11 Oct 2005)

> Why, my pension package is between me and revenue. I take it revenue will seek clarification from all interested parties. But how do revenue calculate the reduction in pension.


 
Trustees of scheme and PRSA provider have a responsibility not to pay out benefits in excess of Revenue limits.  If one isn't aware of the other, they can't police this.  



> The idea of taking out the PRSA AVC was that your employer is not aware of the existance of your addition pension scheme.


 
Not really.  The idea was to offer you a wider choice and possibly better charges.  Keeping your AVCs secret from your employer was an afterthought.  Why would you care if your employer becomes aware that you were salting away big AVCs when you retire?  You've retired and no longer work there.


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## asdfg (12 Oct 2005)

I'm just trying to get the max pension allowed by revenue. One area of concern to me is what figure is used to calculate the reduced pension on taking a lump sum. If the company pension is 14 (for every €14 taken in lump sum leads to a €1 reduction in annual pension) then my pension based on taking a €60,000 lump sum will be reduced by €4,286 or if the figure is 9 the pension will be reduced by €6,667. 
Does anyone know what figure is allowed by revenue? 
Anyone know where these figures originated? 
Has anyone seen a figure better that 14?


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## Homer (14 Oct 2005)

Hi asdfg

As far as I know, if you are in a defined contribution scheme, Revenue will allow commutation by reference to current annuity rates.  If you are looking at an index linked pension, these rates can be very high, up to 30 to 1 or more at some ages.

If you are in a defined benefit scheme, the commutation factor will depend on the rules of the particular scheme.

If you are able to use a rate calculated by reference to current annuity rates, this will greatly enhance your ability to provide extra benefits through AVCs.  It's not clear from your postings what type of scheme you are currently in, although there is an inference that you may be in a defined benefit scheme providing 2/3rds of salary less the State pension.  You should ask your employer's pension advisers for clarification of the precise position in relation to your options.

Regards
Homer


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