AVC in private sector

Hi,

my girlfriend works for a large financial institution and is on a private-sector defined benefit scheme. She's 38 with 7 years service.

She wants to apply to pay AVCs to increase her pension. I am urging her to get independent advice as to whether this is the best option as I do not trust any financial institution especially one trying to sell you a product. Also, she can't be certain she will stay working there for ever.

My understanding is that there isn't an option to buy service but I'm not totally sure.

Questions: Are AVC's a good idea? Is there a better idea? What happens if she ever leaves the job? Would she be better off with a PRSA for independence and flexibility?
Is there any where to get really independent advice with expertise in this area? (Private sector defined benefit pensions).

I should add I'm a bit of a novice with pensions so treat me like an idiot. It's just my instinct that she should look around more.

Thanks in advance.

My understanding is that there isn't an option to buy service but I'm not totally sure.

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I would be very surprised if there is an option to buy service. This is generally reserved to some public pensions

Are AVC's a good idea?

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Yes: you get tax relief at your marginal relief. If you are paying tax at 41% you get 47% (41% tax and 6% prsi) of any contribution back. So if you pay 100 to an AVC you get back 47. The contributions can be weekly monthly from payroll or a lump sum payment. If a lump sum payment and if payment is made on or before 31st Oct you can offset against the previous years income.
For AVC you should be aware of what % of monthly/lump sum is invested
Also be aware of the annual % charge and the bid / offer spread

Is there a better idea?

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Not that I know of.

What happens if she ever leaves the job?

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AFAIA, the AVC is independent of the main scheme and will be held (invested) for her until she draws down from the main scheme normally retirement age 65 or she can transfer to another approved scheme.

Additional Info
She can contribute to the pension by way of AVC subject to revenue rules for which tax relief is available

Under 30............... 15%
30-39 .....................20%
40-50......................25%
50-55......................30%
55-60......................35%
60 or over............ 40%

She could use the AVC to take the Lump Sum of 1.5 times final salary at 65 which is tax free without it affecting her pension.

asdfg said:

Yes: you get tax relief at your marginal relief. If you are paying tax at 41% you get 47% (41% tax and 6% prsi) of any contribution back. So if you pay 100 to an AVC you get back 47.

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Once earnings go over circa the €48K mark this would be just 41% + 2% relief rather than 47% right?

MMilken said:

Once earnings go over circa the €48K mark this would be just 41% + 2% relief rather than 47% right?

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That's true unless she makes a large enough AVC contribution to take her back within the PRSI threshold.

Thanks - am fed up to the gills of people saying that a high rate taxpayer gets 47% relief, for most high earners (say 100K+) it is 43% not 47%.

MMilken said:

Thanks - am fed up to the gills of people saying that a high rate taxpayer gets 47% relief, for most high earners (say 100K+) it is 43% not 47%.

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Yes - but if you only paid 41% tax and 2% health levy on income then 43% relief is full relief of all deductions!

It is not 47% relief - and this is often overlooked.