# Civil Servant and AVC Pension Plan should i sign up or not ?



## Moon (31 Jan 2006)

*Civil Servant and A.V.C. Pension Plan should i sign up or not ???*

See quote I received below

Received following quote from a broker on behalf of New Ireland Assurance last October 2005. I am thinking of joining into an AVC pension plan and from qoute below would have to pay 
Net Per 2 weeks Cost                  €38.74  (weekly cost 19.37)

Am I better to hold off on this paln for the moment for I have reason to believe the Government are planning on making pension compulsory in some form or other.
*Recommended contribution assumes an investment return of  8% pa*


Joined civil service March 1996 (age 26) paying PRSI Class A1

Date of Birth 26/11/1969 Age next birthday 36 (actually now am 36)

Proposed Retirement Age 65

Total reckonable service 39

Current gross basic salary €34,673

Current gross basic wage €1,329 per fortnight

Net Pensionable Salary €16,057

Net Pensionable Wage €615.46 per fortnight

*Exsisting Retirement Benefits Employer and Social Welfare*


Projected Pension (39)/80 x net pensionable wage = €300 per fortnight
Contributory Old Age Pension                                    €358 per fortnight
*Total* *€658 per fortnight*

Projected Gratuity; 3 x (39/80) Gross Basic Salary = €50,709 Tax Free

*Maximum Allowable Benefits as Defined by Revenue*


Pension 2/3 x Gross Wage =             €886 per fortnight
Contributory Old age Pension =             €358 per fortnight
*Total   * *€1244 per fortnight*

Gratuity 120/80 x Gross Basic Salary = €52,009 Tax Free


*ShortFall*


Pension (€1,244 less €658) =                       €586 per fortnight x 26wks x 16 (Av life expt)

                                          =                €243,776  less €50,709

                                         =                 €193,067

Gratuity (€52,009 less €50,709) =            €1,300 (tax free lump sum)

Fund Provided                         =            €194,367


*Recommended Gross Per 2 weeks contribution*


% of salary      

.056                                         €74.50


Less tax relief @42%             €31.29

Less PRSI Relief 6%                    €4.47

Net Per 2 weeks Cost                  €38.74  (weekly cost 19.37)

Overall net Contribution €38.74 x 26.09 x 29 years left = €29,311

 Look forward to replies


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## Ravima (31 Jan 2006)

*Re: Should i join an AVC pension*

could you buy back the years from the Civil Service? The broker/advisor will not advise you on this as there is no commission, but you migth check with your HR dept


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## legend99 (6 Feb 2006)

*Re: Civil Servant and A.V.C. Pension Plan should i sign up or not ?*

i thought you can only have one pension? I.E. if you are part of a civil service pension I thought you can't have another private one??


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## Laurie (6 Feb 2006)

*Re: Civil Servant and A.V.C. Pension Plan should i sign up or not ?*



			
				legend99 said:
			
		

> i thought you can only have one pension? I.E. if you are part of a civil service pension I thought you can't have another private one??


 
The original post referred to an _AVC pension plan_.


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## legend99 (6 Feb 2006)

*Re: Civil Servant and A.V.C. Pension Plan should i sign up or not ?*

i thought it didn't matter...it still means you are contributing to 2 pension plans at once....you contribute to the civil service one (the 3% of gross and 3.5% of net) and you are then funding a seperate one yourself???


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## Conan (6 Feb 2006)

*Re: Civil Servant and A.V.C. Pension Plan should i sign up or not ?*

Any member of an Occupational Pension Scheme can contribute AVCs in order to provide additional benefits (up to the Revenue maximum). In the case of Civil Servants this can be either through:

Buying "added years" within the Civil Service structure
Contributing AVCs to the appropriate union managed AVC scheme, or
Starting a new stand-alone AVC through a PRSA
As to which is best..... well that depends on your personal requirements. Take advice.


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## legend99 (6 Feb 2006)

*Re: Civil Servant and A.V.C. Pension Plan should i sign up or not ?*

if (like me!) you have an existing value in a private defined contribution scheme from life before civil service whats the best thing to do with it? 
My notional years of service purchase cost is close to 30k and don't really have that to hand! So can't buy it up. So should I trasnfer in the existing value from that pension fund when I can do that after 2 years in the civil service and just start AVCs off my own back when I can afford it?


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## Ravima (6 Feb 2006)

*Re: Civil Servant and A.V.C. Pension Plan should i sign up or not ?*

Legend: 

I an non civil service, so I can only go on what I read. Civil Service pensions are the rolls royce. It cannot go belly up, it is guaranteed to be paid and increases in line with the increase in pay gnerally in civil service. Would your current private pension go anywhere towards the €30K to buy back your years? If it would , then in my own humble opinion, you should simply transfer.


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## legend99 (7 Feb 2006)

*Re: Civil Servant and A.V.C. Pension Plan should i sign up or not ?*

the 20k only buys 1.6 years. Which I was a bit shocked at considering they would have it for 35 years...i need to produce nearly anothr 30k to buy the remaining 2.7 years!!!!


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## Conan (7 Feb 2006)

*Re: Civil Servant and A.V.C. Pension Plan should i sign up or not ?*

legend99
This only goes to show how valuable (costly) the Civil Service pension benefits are. And €20k would not represent the full commercial cost.
At retirement, the typical Civil Service pension package would cost circa 33 times salary (yes, 33 times salary) to buy on the open market.
And in addition, recent evidence suggests that public sector earnings are now typically higher than in the "real world" (where one cannot get equivalent pension benefits, even if one's employer could afford such).

Looks like we are developing a two-tier pension system, the public servants and the the rest (who finance the public servant pensions).


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## RainyDay (7 Feb 2006)

*Re: Civil Servant and A.V.C. Pension Plan should i sign up or not ?*



			
				Conan said:
			
		

> Looks like we are developing a two-tier pension system, the public servants and the the rest (who finance the public servant pensions).


Let's not forget that public servants pay taxes (just like you) and pay a deduction towards the costs of their own pension too.


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## Protocol (8 Feb 2006)

Yes, public servants typically pay 6.5% of salary for their pensions.

Post 1995 workers are slightly different.

But, yes, this is still very good value and costs the taxpayers a lot more.


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## aileen (10 Feb 2006)

I am a civil servant too and am In a similar situation to Moon's. I very much would like to hear from anyone who can say that AVC's are the way to go. Also the charges associated with them both from the broker and new Ireland seem rather high in comparison to other managed funds. Am I wrong ?


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## Conan (10 Feb 2006)

If you have a shortfall in benefits at retirement (because of short service) then AVCs can help to bridge the gap.
You have two options (apart from buying added years within the Civil Service scheme):

Join your Union AVC scheme
take out a PRSA AVC scheme independently.
You should compare the charges under both. You need to look at :

How much of each contribution is invested (say 95% plus)
What is the annual fund management charge (typically 0.75% to 1%).
Keep asking questions until you are clear on the charges. Otherwise the Union AVC or the PRSA AVC will be broadly similar.


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