AVCs for Public Servants

Re: AVC's for Public Servants

Legend,

There are cases of relatively lowly paid public servants who retire on low pension. Typically this can happen where there is a high level of non superannuationable overtime, bonus or on call payments. If their scheme is coordinated/integrated then the Contributory OAP is subtracted leaving a very small pension.

Would you begrudge them the ability to set up PRSA to supplement their pension?

aj
 
Re: AVC's for Public Servants

For clarity I should have stated that one is entitled to a 2/3rds of salary benefit package PLUS any State Social Welfare Pension.
Therefore if your main scheme pension is "integrated" with the State Social Welfare Pension (i.e your total pension is say 2/3rds of Salary inclusive ot SSWP) then that provides scope for AVCs even if you will have 40 years service.
 
Re: AVC's for Public Servants


hey, i was just wondering out of curiousity!
 
Re: AVC's for Public Servants


Conan

Can you point me in the direction of the legislation where this is stated. A company working on behalf of my union is currently trying to sell an AVC to me and NEVER mentioned this fact. I would like to be able to show him a booklet or something and ask him to explain!!!
 
Re: AVC's for Public Servants

My two-cents worth...

Why don't you get your union sponsored company to spell out in writing what your AVC entitlements are - they would then have to stand over the information.

What is your Normal Retirement Age NRA? I know that the Revenue recently conceded that for primary teachers this is age 55. i.e. they can fund for their full 40/80ths of pension at that date.

As a civil servant, if you fund for full Spouses and Childrens benefits at retirement through an AVC, can the revenue insist that this benefit is put in place prior to an ARF? Again, if someone says otherwise, get it in writing.
 
Re: AVC's for Public Servants

G123 said:
Why don't you get your union sponsored company to spell out in writing what your AVC entitlements are - they would then have to stand over the information.
Click to expand...

I was thinking of doing that, but the company may be long gone by the time I come to draw down my AVC!!. I don't really fancy suing my union.

I've had a look at the Pensions Board website but cannot find much info on this particular subject!
 
Re: AVC's for Public Servants

podge,
Sorry if I sound like a broken record on this. This is Primary Cert pension.

The Revenue Pensions Manual, Chapter 6, paragraph 4 sets this out.

Any pensions consultant who knows even only the basics knows that you cannot have a pension of 2/3rds salary + 150% tax-free lump sum.

If you are being told otherwise....they are wrong.
 
Re: AVC's for Public Servants


Thanks Conan.

Would the fact that the AVC will end up in an ARF make any difference?
 
Re: AVC's for Public Servants

You can have 1/2 pay and 1.5 lump sum at retirement.
Any AVCs left over are put into an ARF and can be drawn down in
any way choosen.
 
Re: AVC's for Public Servants

bstop said:
You can have 1/2 pay and 1.5 lump sum at retirement.
Any AVCs left over are put into an ARF and can be drawn down in
any way choosen.
Click to expand...

This is what I thought.

Example:

current wage €45k
pension = €22,500
the current 20% tax band €32k
ARF = €100k
If I were to start drawing down my pension now, I could drawdown almost €10k p.a.and still be taxed at 20% (having got relief on the pension contributions @42%)

If this is the case, then is my pension not more than the 50% allowable?

I'm confused
 
Re: AVC's for Public Servants

Originally Posted by ajapale
Legend,

There are cases of relatively lowly paid public servants who retire on low pension. Typically this can happen where there is a high level of non superannuationable overtime, bonus or on call payments. If their scheme is coordinated/integrated then the Contributory OAP is subtracted leaving a very small pension.

Would you begrudge them the ability to set up PRSA to supplement their pension?

aj

Been thinking about this....and I'm still confused. Just cause your salary is low I didn't think you'd be allow make AVCs if you would have full 40 years of service. Reason being that I thought it was all based purely off percentages as opposed to being allowed vary the percentage with a low salary.
By the way, it interests me a lot as I either need to buy notional years of service myself or else make AVCs and I don't know which to do
 
Re: AVC's for Public Servants

Hi Everyone,

Thanks for all the posts.
This is obviously a complex area with more than a little uncertainty.
I came across a website www.prsacentre.com which promotes the notion of PRSA AVC's for public sector employees.
Just wondering if anyone has any experience in dealing with them.

Regards,

Brian_M
 
Re: AVC's for Public Servants

Conan

I used to work for one of the union providers (the one who highlighted to revenue the ability of A1 PRSI payers to fund for extra pension).

The reason that D1 PRSI payers are allowed to fund for extra pension is that the revenue have now accepted (thanks to the work of said company) that the superannuation scheme was set up to allow members use their lump sum and "commute" it to a pension to therefore provide a pension of 2/3rds final salary.

However they were using a commutation factor of 9 or 10 (i.e. 9% or 10% annuity rates). Now annuity rates are 5% at best so it has rendered the old assumptions wrong and hence the change.
 
Re: AVC's for Public Servants

BobbyT,

By all means challenge other posters but please do not personalise your challenge. I have edited some of the personalised remarks from your post.

aj

This thread from last year makes interesting reading.
 
Re: AVC's for Public Servants

Bobby T,
Not sure I understand your point.
What I said still stands. You cannot fund for a pension of 2/3rds PLUS a tax-free lump sum of 150% of Salary.
I accept that in calculating the "pension equivalent" of the tax-free lump sum it is no longer common to use a divisor of 9:1. Generally now the Revenue will accept a 16:1 ratio. Therefore 150% tax-free is equivalent to a pension of 9.4%, thus giving a total pension value of circa 59.4%. It is certainly possible to pay AVCs to bring that up to 66.66%.
But again you cannot fund for 2/3rds PLUS 150%.

The above is more specifically applicable to pre-1995 employees (non-integrated). For post-1995 employees (integrated with State benefits) there is thus additional scope for AVCs.
 
Re: AVC's for Public Servants

Just to clarify a few things……

It is now possible for Civil Servants to retire from age 50 on an actuarially reduced pension (Circular 10/2005 - Cost Neutral Early Retirement). The Pensions Modeller on this site is good if you want to get an idea of entitlements at a given age: http://www.cspensions.gov.ie/

This means that the reduced pension will fall short of the Revenue limit of 66% (150% lump-sum & 50% pension).

It is possible to take out a PRSA-AVC to make up the difference between the actuarially reduced pension benefits and the Revenue limit of 66%.

Eagle Star will payout PRSA benefits on early retirement (including to Civil Servants). Extract from ES PRSA Disclosure Certificate reads as follows:

“you must wait until you retire under the rules of the pension scheme before you can draw any benefits from the fund built up by the AVCs made to this PRSA. For the purposes of early retirement, an employee is a person that works under a contract of employment, including civil servants. The retirement benefits described above are also available on early retirement.”

ES have confirmed to me that it is possible to draw down PRSA-AVC benefits on retirement at 50 as this deemed to be retirement “under the rules of the pension scheme”.

The bottom line is it can be done but you have to make sure you don’t exceed Revenue limits or you could be penalised. This could mean having to retire early if the money in your fund reaches a certain size. There is no room to change your mind. You need to be sure at the outset that you really do want to retire early.

Assuming you do want to retire early and if you don’t need financial advice, an execution only broker is the best option. LAbrokers.ie can set-up 100% allocation 1% annual management fee PRSAs for €90.

SPM.
 
Re: AVC's for Public Servants

Now this, might be a stupid post but the website says to “ask about money” so here goes….

I am 35, work in the public sector and if I make my full pension contributions (over 30 years), my pension will give me 50% of my retiring salary. My current salary is 50K.
I would like to be able to invest in order to say, get 100% of my full salary, or as close to that as I possibly could.

Going by the Irish life’s website section on AVCs, in order to get 50% of my salary when I retire, I should be investing 21% of my annual salary in AVCs.
I see that I can only get the full tax relief (42% tax relief + 6% PRSI) on 20% of my salary, so say if I decided to contribute this amount (10K), by my humble reckoning, this would amount to 4800 annual contributions after tax relief, which would be 400 pm.

Does this sound right to the gurus out there?
 
Re: AVC's for Public Servants

lucyg,

Sadly, your strategy is flawed. A public servant who retires with full service has no flexibility to benefit from AVCs.

Your limit would be a lump sum of 150% of final salary and pension of 50%.

100% is simply not allowable.

That's not to say that it mightn't be worth your while contributing to an AVC plan - it would give you flexibility to take early retirement.

But what you can't do is use AVCs to exceed the limits of your scheme.
 
Thanks Oysterman. I clearly need to look into this in more detail!
 
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