# Should I sign up for an AVC?



## nancy11 (15 Jul 2010)

Hi 

I am just wondering if i should sign up to an AVC...my current salary is €28,626, im working as a clerical officer in the HSE. At the moment I have 5 years full time service, but I am only 28.  If i work full time for the next 35 years, I will be 63 retiring on full service.  I really dont have any notion of working until I am 63, plus down the line if i have kids etc I would like to go part time.

Can anyone recommend the best option for me? Which company offers the best service etc?

Thanks for your help.


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## aristotle (15 Jul 2010)

My opinion is that you should not do AVCs. You obviously already have a pension so thats good, I would guess you don't have a lot of spare cash so you should try to build up savings. You will probably want to buy property at some stage in the future, you may have to fund children through college etc,  so you should do that first before considering AVCs.

You should have enough money to enjoy life today and up to you retire rather than waiting for a cushy early retirement. I wouldn't put money into AVCs until you can well afford it and you have a good cash savings amount and other investments already.


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## gussy (19 Jul 2010)

I am putting money into an ave to pension and to date I have lost close to 3,000e
 Am I mad to keep this going {i am over 50] or should i stop and save it in the bank. I really need good advice on this.


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## Homer (19 Jul 2010)

gussy said:


> I am putting money into an ave to pension and to date I have lost close to 3,000e
> Am I mad to keep this going {i am over 50] or should i stop and save it in the bank. I really need good advice on this.


 
Hi Gussy

If it's money you won't need to access until you retire and if you are paying tax at the top rate, then it makes sense to invest it through an AVC, unless the expense loadings are excessive.  If you are risk averse, there should be a low risk investment option available under your AVC arrangement, although bear in mind that the expected return will be quite low and may not even match inflation over the period to your retirement.


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## gussy (20 Jul 2010)

thanks homer I am paying some tax at the higher rate and some at the lower rate from this point of view I don't mind and I hope I can manage. I still have a job at the moment. The worry for me is that I could be looking at a bigger loss on retirement. Would you be comfortable that in ten to twelve years that the pension fund will be at least stable.


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## aristotle (20 Jul 2010)

No one knows what will happen over the next 10 years. You cannot guess.


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## voodoobazza (20 Jul 2010)

*Pension Returns*

Folks
Firstly you are getting tax relief, one of the only reliefs available by contriuting to pension.
Secondly you only need returns of 7.5% approx annually to double your money in 10 years time and you will be availing of tax free gross roll up in the fund.
If you have expensive debt etc clear this first.
What ever you do, do not rely on the state for a decent pension in 30 years time.
The current public sector pension liability in this country is the equivilent to 6 Anglos.......no one wants to tackle this issue........


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## aristotle (20 Jul 2010)

voodoobazza said:


> Folks
> 
> Secondly you only need returns of 7.5% approx annually to double your money in 10 years time and you will be availing of tax free gross roll up in the fund.


 
Only 7.5% eh? What has been the average return over the last 10 years? Its been about 0.5% on average, with some irish pensions showing negative returns.

So while its nice to say you will double your money in 10 years with "only" a 7.5% return the reality can be very different.


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## mmclo (13 Sep 2010)

aristotle said:


> Only 7.5% eh? What has been the average return over the last 10 years? Its been about 0.5% on average, with some irish pensions showing negative returns.
> 
> So while its nice to say you will double your money in 10 years with "only" a 7.5% return the reality can be very different.


 
But you're not factoring in the tax relief and you're assuming no ER contribution. I would guess the only people who have lost value on their pensions are those with no ER contribution and getting relief at the standard rate and even then only marginally in one or two years.

Funds would have to shrink 20% every year for this to happen and I don't think many have done this. 

Again just guesswork but I think this would be a minority of those with pensions. With Govt policy on marginal relief moving to 33% and marginal improvement in fund performance everyone with a pension will be ahead of the game

Really need to give the whole picture


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## Marietta (13 Sep 2010)

aristotle said:


> Only 7.5% eh? What has been the average return over the last 10 years? Its been about 0.5% on average, with some irish pensions showing negative returns.
> 
> So while its nice to say you will double your money in 10 years with "only" a 7.5% return the reality can be very different.


 

That is an appalling statistic 0.5% on average over the last ten years and much of that was during the boom years. I'd rather keep my money on a high interest savings account at least I would earn myself 3 to 4 % interest per year.


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