# Should we start/continue AVC's for me/my wife



## MG Midget (20 Sep 2013)

Folks,

Perhaps you can help with the above question:

I am private sector worker, earning €71K, age 46 and currently maximising my AVC's. The value of my AVC's and retained benefits from previous schemes is €200,000. I am a member of a hybrid DC scheme with current minimum pension payable at 65 of €4,700. If I stay until 65 this will increase to €19,000 per recent pension statement

My wife is a private sector worker, earning €68K + €12K car allowance, age 40 and has 2 closed DB retained benefits of approx. €8,500PA at 65 and €2K PA at 65. Her employer has now opened at DC scheme where they contribute 15% of pensionable salary, She is not paying any AVC's.

We are in a lucky position to save €1,500 per month after tax.

Should my wife contribute AVC's? she is looking to take a step back from work in next 2-3 years due to our children's ages (7,4)

We have savings of €275K but do not really want to touch any of this as it is a nest egg.

We would like to tax plan smartly, build enough to maximise TFLS's but not be in a position to be hammered by the tax man in the future or not be eligible for state pension because we saved as hard as we could.

Our PPR mortgage is €263,000, ECB + 1.25, currently overpaying by €250pm, finishes in 18 years at current repayments
We have investment property in Dublin worth €300K, mortgage of €50K, ECB +.95, renting at €1,100pm
3 investment properties in NI, one with mortgage finishing next May others finishing in 10 years after (all rented)

Thanks for your help


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## Brendan Burgess (21 Sep 2013)

Hi MG

Given the complexity of your situation and the figures involved, you should definitely pay an independent finanancial advisor a fee to work out all your options - pensions, tax, investments, mortgages etc.  Given the complexity, I would suggest you use a Certified Financial Planner 

1)  In preparation for that, read this Key Post

Continue with AVC's or pay extra off buy to let mortgage?



> We would like to tax plan smartly, build enough to maximise TFLS's but  not be in a position to be hammered by the tax man in the future


It seems to me that your current pension fund is at or near the maximum for tax efficiency. Therefore you should not be contributing any more. 

Not sure how this works for your wife. 

2) What interest rate are you paying on the properties in Northern Ireland? You should look at paying them off - comparing the net interest rate after tax to what you can earn on deposit. 

3) 





> We have savings of €275K but do not really want to touch any of this as it is a nest egg.


How do you mean it's a nestegg? What do you need it for? It's a huge amount to have for a rainyday fund.  You should put it to work either paying off a mortgage or investing it, probably in equities. 

4) 


> We would like to ...not  be eligible for state pension because we saved as hard as we could.


Be careful about saving too hard. You have considerable wealth ( assuming your properties are not in negative equity). Your wife can easily afford to stop working.   You are likely to be very wealthy in your old age. Don't be too careful. 

5)





> Our PPR mortgage is €263,000, ECB + 1.25, currently overpaying by €250pm,


Why are you overpaying it? 
If it makes sense to overpay it, then you should just set your nest egg against it. 
If it doesn't make sense to set the nest egg against it, you should not be overpaying it either. 

Who is the mortgage with?  You should keep your money liquid so that if they do introduce some discount for paying off trackers early, you can avail of it. 

6) You are overexposed to property 


> Our PPR mortgage is €263,000...
> We have investment property in Dublin worth €300K, mortgage of €50K, ECB +.95, renting at €1,100pm
> 3 investment properties in NI, one with mortgage finishing next May others finishing in 10 years after (all rented)


It sounds as if you have around €800k in property 
That is enough, maybe even too much.

You should look at diversifying your portfolio. If it does not make sense to pay off your mortgages early, you should probably invest your nest egg in an equity portfolio. That way you get diversification and liquidity.

But these are only pointers. A good Certified Financial Planner will charge you a good fee and give you good advice, which you can get a second opinion on from askaboutmoney.


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## MG Midget (21 Sep 2013)

Hi Brendan,

Thanks for your response:

The rate we are paying on the NI properties are:

1. 2.5%, £4K outstanding, rent £425PM, Mortgage finished May 2014
2. 2.5%, £40K outstanding, rent £325PM, Mortgage finished Sept 2024
3. 1.74%, £59K outstanding, rent £400pm, Mortgage finished Sept 2026

Currently we are subsidising the above by £350PM, when the mortgage is paid on property 1 above, we will no longer need to subsidise

We have savings tied up in high yielding state savings, will need to consider reinvestment options as they mature.  We are somewhat reluctant to take much risk as these funds mature.  However, we may well need to review again.

One idea was to keep funds liquid so that if BoI was to be open to a deal to buy out tracker at a reduced rate in the future.

Will certainly look to set a meeting with a CFP.

The only plan we have is to allow my wife step back from work a little for the next while, at the same time she wants to continue working in some form for both the income and sanity!


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## Brendan Burgess (21 Sep 2013)

MG Midget said:


> We have savings tied up in high yielding state savings ... We are somewhat reluctant to take much risk as these funds mature.




There is considerable risk in lending money to the Irish government.  While that risk has reduced over the past year or two, you are lending money to a state which is spending €12 billion more each year than it is taking in from taxes. 





> One idea was to keep funds liquid so that if BoI was to be open to a deal to buy out tracker at a reduced rate in the future.


While these are liquid, in that you can cash them fairly quickly, is the yield on the State Savings not dependent on leaving it in for the full term?

You should make an appointment to see a CFP sooner than later.


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