AVC PRSA & Tax Free Lump Sum Entitlement

[Bananaman]

Hi There,

My father wants to retire in two years time when he is sixty. He has a public sector job and will have over 30 years service on retirement. His basic salary is appox 41k PA and about 78K taking over time & allowances into account.

He has told me that he will be entitled to 50% pension and a lump sum payment of approximately 75K on retirement.

The thing is, he can afford to put 15k for the next two years into an AVC PRSA he would be doing this to avail of income tax savings while working.

We were wondering if he would be entitled to withdraw the full 30k from the AVC PRSA tax-free in two years time on retirement?

I have read that revenue allow a lump sum of 1.5 times annual income as a tax free payment. How is this annual income calculated i.e is it 1.5 times the taxable income of the previous tax year? Or the actual year to date taxable salary in the year of retirement?

Thanks in advance

 

[asdfg]

He has told me that he will be entitled to 50% pension

Get him to check this out. Normally years service \ 80 so if 30 years service pension will be 30/80 or 3/8 of salary.

He may also be able to buy back years. Get him to find out how much this will cost.

If he goes the AVC route he can set up the avc now and provided payment is made before oct 31 he can offset against 2006 salary. he will have to make a return to revenue to claim the tax. Don't forget the PRSI element.

We were wondering if he would be entitled to withdraw the full 30k from the AVC PRSA tax-free in two years time on retirement?

Yes

I have read that revenue allow a lump sum of 1.5 times annual income as a tax free payment. How is this annual income calculated i.e is it 1.5 times the taxable income of the previous tax year? Or the actual year to date taxable salary in the year of retirement

There are numerous ways of calc this but in general it is the p60 in the year prior to retirement.

 

[Bananaman]

I mentioned it to the him about the 30/80 years and he has told me that he bought the extra years to bring him up to the 40. Also he intends making the AVC before the 31st deadline.

Thanks for the advice, its good to be able to run these things by people in the know!