AVCs with full service

The Revenue max pension for a D PRSI in the "integrated scheme " is 50% of gross salary. So since the scheme reduces the scheme pension by the State Pension ,you can use AVCs to add back the equivalent of the State Pension to get to 50% + State Pension.
"Last minute AVC" typically refers to a lump sum AVC invested in the last year before retirement.
 
Just a query re 'Post 2004 people cannot take full benefits before 65, ie, 65 is their NRA' (took this from a post above). Can they still retire and take an actuarially reduced pension from aged 60 though ? If the answer is yes do they need grounds to to this or is it for illness ? Sorry if answer already given Im not clear on this. Is there any exception to where they could get 'preserved benefits' if that is the correct term. Also - anyone know the rules around 'professional added years' - i have come across this term but unsure what it means ?
 
Post 2004s have a NRA of 65 but can take Cost Neutral Early Retirement from 55. Pre 2004 have an NRA of 60 and can take CNER from 50. CNER is actuarially reduced. Either can retire early with a preserved pension, ie, not taken until NRA and not actuarially reduced.
Certain professional grades requiring a professional qualification allow for professional added years. The idea being that time spent pursuing same may not allow enough service before NRA.

Illness not required for CNER. Ill health retirement is different and is not actuarially reduced.
 
Thank you Early riser. Just to clarify - If you retire then at 62 as a post 2004 new entrant you can opt to 'preserve benefits' and that will give you the same pension as if you had worked til 65 BUT only at the age of 65. Is that correct ? That would unfortunately mean 3 years of no salary and no pension. This would be impossible for most people unless you had a second source of income or could you fund AVCs to fill this gap ? How much in an AVC would be needed to fund a pension of 40 k?. If you instead take an immediate actuarily reduced pension at 62 do you need approval from your public sector employer or do you just give them notice ? Are there any rules around professional added years i.e are they only added if you stay til NRA or can you get them if you go at 62. Also i presume retirement on ill health grounds would require certification of being unfit for work by occupational health doctors.
 
Hi Susie
As a post 2004 if you retire at age 62 with a preserved pension you get your full (earned) Occ Pension from 65, eg, if you have 30 years service at 62 you will get a pension based on 30 years of service at 65. AVCs would not fill this gap as you can only draw down from the AVC fund at the same time as the Occ Pension - in this case 65. So no income - You could apply for Jobseekers Benefit - payable for 9 months.

You do not need approval for CNER - just normal notification. Give them some time to calculate your entitlements. If you have an AVC you have to draw it down at this time also, eg, to top up the lump sum and, if anything remaining, set up an ARF.

Yes, ill-health retirement will need to be certified and approved. You might not necessarily have to be seen by the Occ Health dept. It would depend on your condition/diagnosis and your Consultant's report.

The Professional Added Years scheme varies depending on when you originally joined the PS. I don't recall the details but there would certainly be deductions/restrictions in cases of CNER - or, indeed, taking a preserved pension. It is only available for certain professional grades.
 
Just came across this older thread. Really excellent but find pensions very confusing.
My query is about using AVC to max the tax free lump sum.

Pre 1995, class D PRSI ., DB scheme. Fund became career average earnings few years back.
Salary would allow me to hit 200k tax free lump sum (based on 1.5 times salary).
However my projected lump sum (after 40yrs) is 160k. (career average earnings). Leaving a gap of 40k as such.

If I wanted to use an AVC to max my lump sum, do I need to build up an AVC fund of 40k or do I need to build up a AVC fund of 160k. (As sometimes see references that can only take 25% of fund as part of tax free lump sum)?.

Thanks for any help on above question.
 
I'm confused. If you are a Pre95 member are you not in the traditional Defined Benefit scheme? The career average scheme was introduced more recently, but its not backdated. So I doubt it applies to You?
In any event, in the example you outlined, you could build up an AVC fund of €40k and use it all to bridge any shortfall in the retirement lump sum.
 
Thanks Conan - that’s good to know.

The traditional DB rules were locked in based on salary at that particular date. From then on it became career average for everyone. (Including pre 95 staff) . So 1/80th of one’s salary for each individual year rather than final salary.
 
This is a great thread. Thank you all.
I am in post 95, pre 2004 co-ordinated scheme and plan to retire at 60.
I will have close to maximum years at age 60.
I will take tax free lump sum at retirement so i am then entitled to maximum 50% of my salary in retirement.
I also understand i am entitled to a supplementary pension from age 60 to state pension age from my employer if i am not working.

If i setup an AVC PRSA now to fund the state pension shortfall (as suggested previously in this thread), and i stop working fully so that i am entitled to the supplementary pension, i understand the supplementary pension will be reduced to take into account of the pension i am receiving from the AVC PRSA which means i wont get any real benefit. If i continue working somewhere else after 60, it seems i will get benefit as i will not be entitled to supplementary pension.


When i reach state pension age, i hope i will not need to work and i will have:
  1. employer pension
  2. state pension
  3. AVC pension
where the addition of my employer pension and state pension will reach my pension limit of 50% salary.
So it seems the AVC pension will be wasted and my employer pension or state pension will be reduced.

Is my analysis wrong?
Appreciate your advice.


Thanks very much
Silvergrove
 
silvergrove said:
I will have close to maximum years at age 60.
I will take tax free lump sum at retirement so i am then entitled to maximum 50% of my salary in retirement
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You annual pension is determined by your pensionable salary. As you are on a coordinated scheme it will not be 50% of your salary. If you had the full 40 years at 60 then your annual pension would be 50% salary minus €13,000 (ie, the equivalent of the State Pension).
If you are not working after 60 you first need to claim any Social Welfare Benefit to which you may be entitled. Only when this has been exhausted (or refused) can you claim a Supplementary Pension (from your former employer). The exception to this is when the Social Welfare payment is less than the equivalent Supplementary - in that event you could claim a top-up from your former employer.

silvergrove said:
If i setup an AVC PRSA now to fund the state pension shortfall (as suggested previously in this thread), and i stop working fully so that i am entitled to the supplementary pension, i understand the supplementary pension will be reduced to take into account of the pension i am receiving from the AVC PRSA which means i wont get any real benefit.
Click to expand...

That is incorrect. You can use the AVC to set up an ARF and draw down from it as you wish. This has no impact on your eligibility for the Supplementary. You will pay tax and USC as normal on any drawdown, and Class S PRSI up until 65/66. You cannot claim the Supplementary if you are in insurable employment or self-employment.

silvergrove said:
When i reach state pension age, i hope i will not need to work and i will have:
  1. employer pension
  2. state pension
  3. AVC pension
where the addition of my employer pension and state pension will reach my pension limit of 50% salary.
So it seems the AVC pension will be wasted and my employer pension or state pension will be reduced.
Click to expand...

As before, there is no reduction in your Occupational Pension and State Pension. Provided there is still money in the ARF after you State Pension age you can continue to draw down from it as before. There is no "penalty" (other than tax and USC).

If you have less than 40 years of PRSI payments at 60 you should ensure you continue to get credited contributions afterwards.

If you will have close to full service at 60 you will have only limited scope to top up your tax free lump sum. Anything else needs to go into an ARF (or Annuity) and will be taxed at drawdown, as outlined. Still if you can get tax relief at 40% on contributions to the AVC and your combined income in retirement (whether from Occupational Pension, Supplementay, ARF or State pension) is still below the 40% tax threshold then it is a worhwhile option. However, you need to think of the pros and cons carefully if your total retirement income is likely to bring you into the 40% tax bracket.
 
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Thank you very much Early Riser for that detailed reply - i appreciate it.

I am a bit confused still as i copied the following text from:


The supplementary pension represents the difference between the total of the pensions actually received by the person and the pension that would be payable if the occupational pension was not co-ordinated with the Old Age Pension.

If my AVC PRSA is transferred to an ARF, i will need to drawdown 4% from Age 60 and this will reduce my supplementary pension?
If i keep it in a vested PRSA, it will not affect my supplementary pension as i will not be drawing income?

If this is the case for supplementary, then perhaps the same occurs when i reach state pension age?

Thanks very much,
Silvergrove
 
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silvergrove said:
If my AVC PRSA is transferred to an ARF, i will need to drawdown 4% from Age 60 and this will reduce my supplementary pension?
Click to expand...
No. The ARF drawdown has no relevance to your eligibility for the Supplementary (or the State Pension).
The TOTAL in your quoted sentence refers to the Occupational Pension (or pensions from separate public service bodies) awarded by your employer based on your service. The AVC/ARF is a private arrangement and of neither interest nor relevance to your employer. Only the Revenue have an interest in it.
 
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Thanks EarlyRiser.
So this means i can get a pension income after i retire at age 60 which is higher than 50% of my final salary - i did not know that!
Thanks again
 
silvergrove said:
So this means i can get a pension income after i retire at age 60 which is higher than 50% of my final salary
Click to expand...
Yes you can. There are limits, set by Revenue, on the total pension fund, but in the situation you have outlined this is most unlikely to be a issue you need to consider.
 
Very interesting.

As a public servant, how is the total pension fund calculated if there are limits set by Revenue?
 
Mr Black said:
Very interesting.

As a public servant, how is the total pension fund calculated if there are limits set by Revenue?
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long standing Public Servants (Class B or D PRSI) who are members of the old Defined Benefit Scheme (typically pre-1995) can get a pension of 50% of salary plus a lump sum of 150% of salary if they have completed 40 years service. This would be the Revenue maximum. They would not qualify for a State Pension.
Post 1995 recruits typically get the same benefits, BUT the pension element is inclusive of the State Pension since they are typically Class A for PRSI contributions.
More recent recruits (post 2013) are members of the new Single Public Sector Pension Scheme, which is a career average salary scheme - very different to the other two schemes.
 
Mr Black said:
As a public servant, how is the total pension fund calculated if there are limits set by Revenue?
Click to expand...

The maximum annual pension benefit allowed by Revenue is 2/3 final remuneration (based on full 40 year service). For public servants this is reduced to 50% to allow for the tax free lump sum.

Public servants on Class D or B PRSI obtain this amount directly from their pension scheme. As far as I know, this means people in these schemes with full service at retirement have little scope to fund additionally through AVCs (they can fund if short of full service). There are some exceptions to this, eg, if the person has more than 40 years and is retiring beyond normal retirement age. There may be some small other leeway that I am unaware about.

However, post-1995 public servants on Class A PRSI do not get this level of pension benefit from their scheme. They pay PRSI towards the State Pension and this (the State Pension) does not count towards Revenue limits (even though the combined Occupational Pension and State Pension should equal 50% of final salary after full service). Because of this Class A people have considerable scope to fund additional benefits through AVCs - up to the value of the difference between their actual pension award at retirement and the the value of the pension they would have been given if they had been on Class D PRSI (the older uncooordinated scheme). For someone with full service, this equates to the State Pension amount. If short of full service they can also use an AVC to top up the tax free lump sum, in the same way as their Class B/D equivalents.
 
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Early Riser said:
Public servants on Class D or B PRSI obtain this amount directly from their pension scheme. As far as I know, this means people in these schemes with full service at retirement have little scope to fund additionally through AVCs (they can fund if short of full service). There are some exceptions to this, eg, if the person has more than 40 years and is retiring beyond normal retirement age. There may be some small other leeway that I am unaware about.
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They can make AVCs to fund for the shortfall in widows or widowers pension.
Revenue limit 100% of workers pension. Public sector maximum 50% of workers pension. This allows scope for very large AVCs.
 
bstop said:
They can make AVCs to fund for the shortfall in widows or widowers pension.
Revenue limit 100% of workers pension. Public sector maximum 50% of workers pension. This allows scope for very large AVCs.
Click to expand...

Yes. This gives leeway. Well short of the Class A people, though.
 
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