Pre-1995 Civil Servant and AVC's

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tallpaul

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Posting this on behalf of a neighbour and would be grateful for an insight as I wasn't 100% sure:

They are a pre-1995 Civil Servant (i.e. reduced PRSI and therefore no entitlement to State Pension). They have no breaks in service and should comfortably reach 40 years service to get a full CS pension. In this case, I assume (and indeed said to them) that there is no point in having to take out an AVC? However I am now doubting myself and don't want to give them poor advice/information.

I also assume that they could take out a private pension if they wanted something more for retirement?
 
If they have 40 years service they will get a tax free lump sum of 120/80 of pensionable remuneration from the Occ Pension. Revenue will allow up to 135/80 but only under two conditions: there is up to 5 years service in excess of 40 and the excess is served after normal retirement age for the scheme (60).

For example, if your neighbour retires at 64 with 43 years service they could take 9/80 of pensionable remuneration tax free from an AVC. A last minute AVC might be the handiest way to fund this.
 
Curious about this.
What options are available for someone who has 41 years by 60.

So for each extra year they can get a potential 3/80 extra up to the max of 15/80 after 5 years?
But this only applies to years worked after 60?
 
From Chapter 8 of Revenue's Pension Manual:


"The part of the aggregate benefits which an employee who remains in service after NRA may take in lump sum form may be increased up to the maximum approvable on the basis that the actual date of retirement was NRA; that is, 120/80ths of final remuneration at the date of retirement, or, where service is less than 40 years, any lesser amount as outlined under Chapter 7.2

If total service exceeds 40 years, the lump sum element of the aggregate benefits may be increased by 3/80ths of final remuneration at the date of retirement per each additional year of service, up to a maximum of five years.
Example
In example A in paragraph 8.2, where the individual had 47 years’ service (42 years to NRA and five years thereafter) the maximum lump sum is 45 x 3/80ths of final remuneration at the actual date of retirement.
In example B, where the individual had 43 years’ service (38 to NRA and five years thereafter) the maximum lump sum multiplier is 43 x 3/80ths"

In the case of the PS, the potential extra 15/80 tax free in the lump sum would have to be funded by the retiree from an AVC.
 
If they are taking early retirement and have AVCs they could gain class S prsi contributions (from ARF drawdowns of a minimum 5000 euro per year) up to age 66. These combined with any ORD or A class prsi from pre establishment could allow them to qualify for a partial contributory pension. A combined total of at least 260 ORD, A or S contributions would qualify them for a pro rata pension.

They can as you suggested, use their AVCs to take out an extra private pension. This could be an Annuity or an ARF.
 
Also curious about AVCs and tax free lumps sums.

If someone has a public service pension option of taking a pension of 60/80ths with no lump sum (as an alternative to the normal 40/80ths with 120/80ths lump sum) can an AVC be drawn down as a tax free lump sum - the premise being that essentially no tax free lump sum was availed of as part of the pension scheme?
 
S class said:
They can as you suggested, use their AVCs to take out an extra private pension. This could be an Annuity or an ARF.
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The caveat here is that Class D/B public servants who retire at 60 with full service have relatively little room to manoeuvre with AVCs without risking overfunding (unlike their Class A PRSI counterparts).
I don't know how capitalisation is calculated here but they have a pension of 50% from age 60, a lump sum of 120/80 and provision for a survivor pension of 50% on retiree's pension.
 
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Early Riser said:
The caveat here is that Class D/B public servants who retire at 60 with full service have relatively little room to manoeuvre with AVCs without risking overfunding (unlike their Class A PRSI counterparts).
I don't know how capitalisation is calculated here but they have a pension of 50% from age 60, a lump sum of 120/80 and provision for a survivor pension of 50% on retiree's pension.
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What happens when an AVC is overfunded as in a case such as this ?
Is the overfunded amount drawn down in its entirety on retirement and taxed or does it go to an ARF and can be drawn down as required ?
 
lawoman said:
What happens when an AVC is overfunded as in a case such as this ?
Is the overfunded amount drawn down in its entirety on retirement and taxed or does it go to an ARF and can be drawn down as required ?
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I would guess it is unusual in practice but you face being taxed (etc) at your marginal rate on any overfunding at retirement.
 
Early Riser said:
I would guess it is unusual in practice but you face being taxed (etc) at your marginal rate on any overfunding at retirement.
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I presume you mean at the high rate of 40%? Everybody is taxed at their marginal rate whether that's 0%, 20% or 40%.
 
ClubMan said:
I presume you mean at the high rate of 40%? Everybody is taxed at their marginal rate whether that's 0%, 20% or 40%.
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Good question, ClubMan. I am not sure in truth but I would guess it will be at 40% - to the extent that the amount overfunded got relief at this rate.
 
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