AVCs versus a PRSA

I've been contributing to an Occupational pension scheme for 10 years now but I've never made any AVCs.
Now I'm considering making some additional contributions and I'm wondering whether, in general, is it more effective (less costly, more efficient) to make AVCs or to begin a new PRSA?

When it comes to retirement time are both equally flexible?

I'm wondering whether, in general, is it more effective (less costly, more efficient) to make AVCs or to begin a new PRSA?

It depends on how the AVC charges on your existing (occupational?) scheme compare to those on a PRSA. Charges on a Standard PRSA are capped at 1% annual management fee and 5% on each contribution although it's possible to get lower than this (e.g. 1%/0% for the payment of a once off arrangement fee of a few hundred €). Obviously the range of funds available under each alternative is important too.

When it comes to retirement time are both equally flexible?

I'm not sure about the differences in this context. Perhaps these links might be of help?
<!--EZCODE LIST START--><ul><li></li><li>Pensions Board</li></ul><!--EZCODE LIST END-->

Re: AVCs versus a PRSA - Tax Relief

I'm trying to make up my mind whether to go for the company AVC or to set up my own separate PRSA.

I have compared costs. However, I also have the following concerns:


1. AVC with Defined Benefit Occupational Pension -
Are AVCs safe?

If I opt for an AVC, will my investment be safe if the company and/or company pension scheme run into difficulties?
I work for a 250 person company. In my (humble) opinion, our defined benefit pension scheme is very underfunded. I also have concerns about the long-term viability of the company.


2. PRSA with Occupational Pension -
Is this possible?

Can anyone confirm that it is indeed possible for someone already contributing to a defined benefit occupational pension scheme to also opt for a standalone PRSA from an authorized adviser instead of the company-provided AVC and still obtain tax relief on the PRSA contributions made?

The total amount I will contribute to the Occupational Pension scheme and PRSA will be less than the maximum 25% allowed. I am not already making AVC contributions.


3. Tax relief source

I presume the tax relief must be claimed back afterwards rather than granted at source as in the case of the AVC.


4. Tax relief amount
Same for AVC and PRSA?

I earn 60K approx per year so I will be able to claim 42% tax relief on the PRSA and AVC.
As of Jan 2004 I am also entitled to claim back the 2% Health Levy on the PRSA as well as the AVC. (Clubman has done some trailblazing here.)

I think this is correct?

With most occupational schemes....

...... to contribute AVCs you have to use the facility available ( i.e. the main scheme ) and therefore a seperate PRSA isn't an option. Check this with your scheme administrator.

Re: With most occupational schemes....

Thank you Alan.

Does that mean I cannot go to an independent broker myself to set up my own PRSA and contribute to this in addition to my DB occupational scheme and receive tax relief on these PRSA contributions?

My problem with my DB occupational scheme is that to me it seems underfunded. I am worried about making AVC contributions via this scheme just in case the company or pension scheme run into difficulties.

Regards, ngirl

Re: With most occupational schemes....

Does that mean I cannot go to an independent broker myself to set up my own PRSA and contribute to this in addition to my DB occupational scheme and receive tax relief on these PRSA contributions?

Exactly

My problem with my DB occupational scheme is that to me it seems underfunded. I am worried about making AVC contributions via this scheme just in case the company or pension scheme run into difficulties.

AVCs normally be treated in isolation. However I would take this up with whoever your point of contact is.

Re: With most occupational schemes....

Alan

Thank you very much for your help.

Regards,
Ngirl

Re: With most occupational schemes....

Must disagree with Alan re PRSA. It is now possible to establish a stand-alone PRSA AVC. This can de established separate from the main scheme if the member wishes. They are simply required to inform the main scheme Trustees that they are establishing such an arrangement.
The individual will not be able to avail of salary deduction (in all probability) and will have to contribute via direct debit. They will also have to reclaim the tax relief directly from Revenue.
The normal tax relief and Revenue limits apply.

Re: With most occupational schemes....

Hi Conan,
Getting an education here. I was under the impression that an AVC PRSA could be set up but only with the approval of the trustees and where the trustees had the power to do so also.
???
Alan

Re: With most occupational schemes....

Found it, I stand corrected. These policies it would appear have not been available too long. Thanks Conan.

Re: With most occupational schemes....

Conan, Alan,

Once again thanks for your help.

Regards, Ngirl

which are the most competitive?

It is now possible to establish a stand-alone PRSA AVC

Re: which are the most competitive?

[broken link removed] website has useful backgrounder on AVC PRSAs.