AVC options with DB full pension

[Ret45]

Grateful for advice on the following situation...

I will have full service (40 years) as a civil servant when I retire at 65 in about 10 years time. I am an A class PRSI contributor and in a DB civil service scheme.

Back in 2007 I set up an AVC in case I wanted to opt for early retirement and its currently worth around €100k. However I now intend to work until 65.

After I retire will it be possible to preserve the AVC funds as they are and keep them invested indefinitely or do I have to draw them down by a certain age or time after retirement? Ideally I would never draw them down and leave them in my estate to my wife and children as my wife does not have her own pension - is this possible?

 

[Steven Barrett]

You have to draw them down at the point of retirement, they are linked to your main work pension.

 

[Ruffian]

You have to draw them down at the point of retirement, they are linked to your main work pension.

But can be transferred to an ARF fund (subject to minimum annual drawdown)? There does not seem to be any room for tax-free lump sum top up here.

 

[Steven Barrett]

But can be transferred to an ARF fund (subject to minimum annual drawdown)? There does not seem to be any room for tax-free lump sum top up here.

Yes, it can be transferred to an ARF or an annuity can be purchased with it. The tax free lump sum can be topped up with it if there's a difference between pension salary under the scheme rules and total actual salary under Revenue rules.

 

[S class]

You might have some extra tax free lump sum possible after you receive your PS lump sum. This would be possible if you have any non personable overtime, allowances or bonuses.

After taking maximum available tax free lump sum you could take out an ARF with the remainder of your AVCs.

You will have to take yearly drawdowns of 4% up to age 70 and 5% after age 71.
You could then reinvest each yearly drawdown into a similar unit fund with your ARF provider. This would allow you to keep as much as possible of your funds in your estate.

As the funds are going to be invested long term, you should opt for high risk, high return funds. Over the long term you could expect a return greater than the yearly drawdowns.
This would preserve and possibly increase the value of your ARF until you pass away.

You should also get your existing AVC funds into high risk, high return funds now.

Does your wife have a good Prsi record ?
Will she achieve full or near full contributory pension ?

 

[Ret45]

You might have some extra tax free lump sum possible after you receive your PS lump sum. This would be possible if you have any non personable overtime, allowances or bonuses.

After taking maximum available tax free lump sum you could take out an ARF with the remainder of your AVCs.

You will have to take yearly drawdowns of 4% up to age 70 and 5% after age 71.
You could then reinvest each yearly drawdown into a similar unit fund with your ARF provider. This would allow you to keep as much as possible of your funds in your estate.

As the funds are going to be invested long term, you should opt for high risk, high return funds. Over the long term you could expect a return greater than the yearly drawdowns.
This would preserve and possibly increase the value of your ARF until you pass away.

You should also get your existing AVC funds into high risk, high return funds now.

Does your wife have a good Prsi record ?
Will she achieve full or near full contributory pension ?

Thanks for the replies which are very helpful. Fully agree on the point about opting for higher risk funds.

My wife does not have a good PRSI record as much of my career has been overseas and her career was limited while accompanying me. She won't achieve anywhere near a full contributory pension. Is that a factor I should be considering?

 

[S class]

If she has little or no income at any time after you claim your own contributory pension, make sure to claim an increase for a qualified adult based on your wife. This can be claimed regardless of your wife's age at the time.

There is a means test for the qualified adult but your income and investments are not means tested.

Only your wife's income and jointly held or held in her own name investments would be means tested.

If you will be claiming for a qualified adult it would be a good idea to transfer any jointly held investments, into your name only, before you claim your contributory pension.