AVC make sense in this scenario ?

C

coolaboola12

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hi All

Does maxing out your AVCs only make sense if you wish to withdraw 4% yearly from your pension pot ?

If you end up withdrawing a much larger sum from ages 65-75 as opposed over 75 and end up paying the higher rate of tax during the years of higher spend , do AVCs not make sense then in this case as you are paying higher rate at withdrawl?
 
50andOut said:
Covered in detail here:

Key Post - My pension pot has reached €800k - should I stop contributing ?

I am starting a new role in a company that does not have a pension scheme. They will offer a PRSA as they are legally obliged to do but they is no offer of contribution. I am aged 51 and I have other pensions that mean that all my future income will be at the higher rate of tax. Am I correct in...
www.askaboutmoney.com
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Thanks. What if the pension pot has not reached 800k . Im just wondering where is the benefit of the tax relief if you are paying the higher rate of tax at the exit ?
 
AVCs can also be used to bring your tax-free lump sum at retirement up to the maximum allowable by Revenue.

That aside, if you know already that you're going to be paying Income Tax at the higher rate in retirement as well as the levies then the argument is not nearly as strong as for someone who's going to be on the lower rate tax or tax exempt in retirement. The arguments in favour are generally ... tax-free growth on investments in an AVC ... discipline - money might get spent otherwise ... deferral of tax ... reduce your tax now to pay it back later.
 
LDFerguson said:
AVCs can also be used to bring your tax-free lump sum at retirement up to the maximum allowable by Revenue.

That aside, if you know already that you're going to be paying Income Tax at the higher rate in retirement as well as the levies then the argument is not nearly as strong as for someone who's going to be on the lower rate tax or tax exempt in retirement. The arguments in favour are generally ... tax-free growth on investments in an AVC ... discipline - money might get spent otherwise ... deferral of tax ... reduce your tax now to pay it back later.
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thanks
 
coolaboola12 said:
Does maxing out your AVCs only make sense if you wish to withdraw 4% yearly from your pension pot ?
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No. There are too many possible scenarios for that assertion to be true in and of itself.
And, as mentioned by @LDFerguson, don't forget about the tax free lump sum of up to €200k.
 
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