# Voluntary redundancy and AVCs



## spalpeeno (24 Jul 2014)

Hi I need advice: My job function is about to be made redundant (replaced by a computer) and the firm have offered a 'package' where I'll get a lump sum based on my years of service. Its not much, about 80k after 35 years.  Im only 54 but would like to retire early and take a deferred pension - small that it is. However, I have about 150k in avcs but am told 'by colleagues' I cant access any of it (well 33% of it but will be taxed) until I reach 65. Is this correct? Thanks in advance.


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## finnegan101 (24 Jul 2014)

hi, the most you can access is 30% of the fund, which will be taxed, but not subject to prsi or usc. 
The tax will be at your marginal rate, so it you are not working, this will be favourable to you, so is not as bad as you may think. 
That being said, access to the remainder of your avc is linked to a pension, ie you have to be in receipt of a pension. 
For clarity, are you taking the pension now, or deferring the pension until a later point? 
Retirement payments from avcs may be payable from age 50 depending on what else you hve selected to do. 
There are other more complicated options of moving the money from the AVC into another pension product, and access that way, without the stringent rules of the avc. 
There are also some goods opportunities for your lump sum, to help ease into retirement for you.


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## LDFerguson (24 Jul 2014)

You must retire the AVCs at the same time as you are taking the pension from the main pension scheme.  At age 54, that could be now if you want it, provided that the main pension scheme allows early retirements.


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## North Star (25 Jul 2014)

Hi Spalpeeno;
You may well have a route to access a portion of both your AVCs and pension tax free cash now, before drawing down a pension income from 60 if your employer's pension fund is a defined benefit scheme. If it is a defined benefit scheme then in your leaving options form ( provided by your employer/pension scheme administrator) you should have the option of transferring your pension benefits including AVCs into a Buy out Bond (BOB). From this you can take the benefits from age 50. To do this you take your pension tax free cash - lets assume 25% of the fund and transfer the balance to an AMRF/ARF which you draw down from 60 ( age 75 for the AMRF). This way you can use a combination of tax free pension cash and redundancy payment to meet a portion/all of your income needs till age 60 when the pension becomes available. 
Your redundancy payment is a totally separate issue, but you need to be very careful here. There may be an option given to you where you can get a higher redundancy payment upfront but have to give up the option to pension tax free cash in the future. You need to weigh these options up carefully. We have done this for members of several pension schemes who were winding up and its quite tricky and depends on the specific in each case to decide what is the best option for the client- in our opinion this is one of the clearest situations when it can really make sense to pay for some independent advice to quantify all the scenarios for you and help you come to an informed decision as to what is the right choice for you.
In addition as the first €63.5k of your ARF has to go to an AMRF whicch you cant access till age 75, you will need to make sure that enough is left in your ARF to meet income requirements not including the AMRF till age 75.
Retirement planning/income is an important issue for you and professional advice is probably going to be money well spent. There are plenty of good independent advisers who post on this site who would be a good starting point to talk to. Look up some of the various threads and see who seems to offer sensible/good advice. You can always ask a couple for an initial discussion which should be free.
I hope this helps. Regards Vincent


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## spalpeeno (7 Aug 2014)

Thanks for the reply. So, in a nutshell, if under the rules of the pension scheme, I am allowed take my pension early (and take the actuarial hit for each year before age 65) then I can access up to 1.5 times my salary as a lump sum tax free?


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## North Star (11 Aug 2014)

Hi spalpeeno,

Sorry I noticed an error in my earlier reply. The option I outlined was if your pension scheme was *defined contribution* ( Not defined benefit as I mentioned in earlier post) If it is a defined benefit scheme then LD Ferguson is correct re AVCs taken at retirement ex the 30% you are allowed early access to.
Apologies for any confusion caused.


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## spalpeeno (12 Aug 2014)

North Star said:


> Hi spalpeeno,
> 
> Sorry I noticed an error in my earlier reply. The option I outlined was if your pension scheme was *defined contribution* ( Not defined benefit as I mentioned in earlier post) If it is a defined benefit scheme then LD Ferguson is correct re AVCs taken at retirement ex the 30% you are allowed early access to.
> Apologies for any confusion caused.



North Star thanks for your reply  and the correction. As an ordinary Joe this whole pension area is a bit of a minefield and difficult to understand initially. I thought way back when I started to make additional contributions - without proper advice I have to admit - that I could take early retirement and withdraw up to 1.5 times my salary tax free and then embark on a plan I've had for quite a while to change tack heading towards a new venture. The modest lump sum was to be my favourable weather to help me navigate my way. Now it seems things aren't quite as simple as that with BOBs, ARFs, etc. Not only has the firm slashed the scheme (under a Section 50) they hold all the aces as to whether an ordinary guy can 'get out' early.


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## spalpeeno (15 Sep 2014)

So Liam, bearing in mind most trustees of DB schemes do not like early retirement, could a member apply for a deferred pension on reaching retirement date (in this case 65) BUT still access one and a half times salary from AVCs on leaving/taking voluntary redundancy? This shouldn't affect the pension fund but is a key factor on whether to take so-called (in my case) voluntary redundancy? Are the two VR and early retirement totally separate and never the Twain shall meet?


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