# AVCs: actual and potential changes to tax relief regime for contributions & benefits



## elacsaplau (21 Apr 2011)

Given the actual and potential changes to the tax relief regime for contributions and benefit limits, does it make sense for middle to higher earners (who are already in a pension plan) to make AVCs from now on?


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## Homer (21 Apr 2011)

It's probably borderline as things currently stand.  If tax relief is reduced further, then it will be difficult to find a compelling argument for continuing to pay AVCs.

Homer


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## allthedoyles (22 Apr 2011)

Homer said:


> It's probably borderline as things currently stand. If tax relief is reduced further, then it will be difficult to find a compelling argument for continuing to pay AVCs.
> 
> Homer


 
Tax relief is dwindling away  , and by year 2014 , there may only be the basis tax credits available to claim for most paye workers .

AVC's are a good way to reduce your tax liability on a weekly / monthly basis .

Use the tax calculators which are available on the taxation forum , and you will see the benefits .


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## minion (2 May 2011)

You cant work out anything to do with pensions anymore.
Anything could happen to them before you retire.
The goal posts have moved on pensions and will continue to move.

The government have really messed up.
Stability is what you need for planning for your retirement. That has now disappeared into a puff of smoke with the fiddling going on with pensions.

Paying into a pension now is just a gamble now.


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## Baracuda (2 May 2011)

*Some good news regarding tax relief.*



minion said:


> You cant work out anything to do with pensions anymore.
> Anything could happen to them before you retire.
> The goal posts have moved on pensions and will continue to move.
> 
> ...


Is there an echo in the pensions forum today? I thought I read the exact same post in another thread.#

Some good news regarding tax relief. 

http://www.independent.ie/business/irish/pensions-relief-decision-welcomed-2634841.html


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## punter (3 May 2011)

Baracuda said:


> Is there an echo in the pensions forum today? I thought I read the exact same post in another thread.#
> 
> Some good news regarding tax relief.
> 
> http://www.independent.ie/business/irish/pensions-relief-decision-welcomed-2634841.html


 
I noticed that article as well. Quoting from it _"A document published on Friday showed high earners would get tax relief of 33pc on pension contributions, more than the 20pc mooted by the last Government" _

Does anybody know what document this refers to ?


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## NorfBank (3 May 2011)

_Tax relief for contributions to existing occupational and personal pension
arrangements currently based on a contributor’s marginal rate of tax will be
replaced with a State contribution equal to 33 per cent tax relief. This will
promote simplicity and equity and ensure that similar options are available to
all groups of employees_

see page 39

http://www.finance.gov.ie/documents/publications/reports/2011/spuapr2011.pdf


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## punter (3 May 2011)

NorfBank said:


> see page 39
> 
> http://www.finance.gov.ie/documents/publications/reports/2011/spuapr2011.pdf


 
Thanks. So as well as higher rate tax payers seing the relief cut from 41% to 33%, standard rate tax payers will see relief increase from 20% to 33% - is this correct ?

I note doesn't say when - Budget 2012 ?

What is the significance of the last line on Page 38 _"A ‘total contributions approach’ will be introduced for those reaching the State pension age from 2020, replacing the current averaging system;"_


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## Baracuda (3 May 2011)

This link explains the current system and at the end of the presentation it explains the "total contributions approach"http://docs.google.com/viewer?a=v&q...EW1gJw&sig=AHIEtbS9SidDCvZKV5aUOtL2TnrH-wls7w

If you are having problems viewing just copy to the address bar!


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## Skybox (4 May 2011)

elacsaplau said:


> Given the actual and potential changes to the tax relief regime for contributions and benefit limits, does it make sense for middle to higher earners (who are already in a pension plan) to make AVCs from now on?



In short, IMO the answer is no!  My husband is very worried that if the pension ceiling is reduced any further (as is threatened in the programme for government - to reduce ceiling to €60,000 per anum = €1.2 million total pension value) then his AVCs will essentially be worthless in the long term.  

His AVCs, in combination with his defined benefit pension will exceed this €1.2 limit and be taxable (up front) at a rate of 69% when he retires.  (because his work contributes to his pension, he cannot stop it growing beyond the €1.2 m value.)    He reckons that when he retires, he will now face a huge tax bill - similar to what the judges were complaining about last week.  Where are we supposed to come up with that kind of cash?  All our savings are tied up in pensions!

He is on good money now, but wasn't always. He has long years of service and put additional savings into AVCs, which he now regrets.  

Better to have your money in some account you own and control, and not in some account where the government can keep changing the goalposts!

Yes...we are feeling a bit sore.  He has worked hard to put by enough to look after us when he retires - now a lot of that is lost.  I haven't seen this issue being raised by many people in the pension industry yet.  
It WILL start to hit more middle income earners once the pension ceiling drops.


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## elacsaplau (11 May 2011)

Thanks Skybox

I initiated this thread and let it flow to see the range of opinions out there. I must say your response is the one which resonates most with me. It is even more valid after the tax on funds which was confirmed yesterday.


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