# Are AVCs worth it if only getting 20% relief?



## L0llip0p (28 May 2009)

PAYE Worker
44k, married, single income, joint assessed

3700 gross pm

Deductions:
PAYE 177
PRSI 236
INC LEVY 75

=3212

company pension. paying 15% AVCs, company contributing 5%.

On payslip deductions it has

Pension DC 75
AVC DC 485
Pension DC 223 (contribution)

485 + 75 = €560 pension related deduction per month. 

560/3733 X 100 is 15% of gross but wheres the higher band tax relief on this?


Have I got this all arseways?? My take home is 2620 pm.


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## GeneralZod (28 May 2009)

*Re: Confused about Pension contributions*

Your take home pay figure looks about right. 

Here's the result of putting your annual gross less 15% (€37,400) into Karl Grabe's Tax calculator.


Monthly take home pay. (Married)
Selected Tax year is 2009 #2: 'Emergency' Apr-09
Gross Take Home Pay     = € 3116.67
Tax                     = € 228.17
Take Home Pay after Tax = € 2888.50
Less PRSI               = € 227.32
Less Spouse PRSI        = € 0.00
Net take home pay       = € 2661.18

Because you're married and single income none of your taxable income is subject to the higher rate tax band so you are not getting higher rate relief on your pension contributions.


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## L0llip0p (29 May 2009)

*Re: Confused about Pension contributions*

Ah... well that brings me to another question then.

When I started my pension last year, both of us were working so I was getting the higher rate of relief on my AVCs. 

Given that now I'm only getting half that relief, perhaps I should scale back my AVCs?

I realise this is a matter of preference but I would appreciate some opinion on this. 

Am I better off sticking with full 15% AVCs @20% relief or should I reduce my AVC contributions thus having more take home pay each month.....


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## L0llip0p (29 May 2009)

*Are AVCs worth it if only 20% tax relief?*

Was getting 42% relief on 15% AVCs, now only getting 20%.

Is it worth paying so much in for less relief


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## Yaffle (29 May 2009)

I've been thinking the same thing but have decided that 20% is better than 0% and I'm buying shares (or whatever my fund is buying) at hopefully the bottom of the market so there will be some future gain in value.  

If you're young and can afford it, it's probably worth doing as you might not be able to afford it later if your circumstances change. Unless you have a better use for your money now.


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## LDFerguson (29 May 2009)

You should try to work out what rate of tax will apply to your pension benefits at retirement.  At present, a couple over 65 can earn up to €40,000 per year and be income tax exempt.  

If your pensions would leave you under the income tax threshold, relief at 20% is an excellent deal as you're getting 20% tax relief and well as PRSI/Health Levy relief and paying no tax on the proceeds.  

On the other hand, if your pensions or other investment income is going to be substantial, e.g. you have a portfolio of rented properties and/or dividend-paying shares, your income tax rate might be 41% in retirement.  If this is you, getting 20% tax relief on contributions but being taxed at 41% on some of the proceeds doesn't add up.  But this is quite rare as I rarely come across anyone who's likely to be on the high rate of tax in retirement but is at the low rate now.


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