Can I have an AVC for public sector & also a PRSA for self-employed

1

123ABC

New Member
Messages
2
Hi everyone,
I'm new to here! I'm just wondering if someone can offer some advice!

I work four days a week in the public sector and I have AVCs for this with Cornmarket.

I also work as a therapist in private practice - self-employed with my own small business - and see about 6 or 7 clients a week.

I'm wondering if I'm able to set up a PRSA for the therapy income (ideally with Cornmarket but anyone really). Seemingly by putting money into the PRSA it's a more tax efficient way?
Or is there a stipulation that I can only have AVCs or a PRSA?

I have an appointment with Cornmarket but that's not until two weeks time.
I've a feeling I can only open a PRSA with them for funds that come from a public sector job (but I could be wrong).

Sorry...pensions isn't my forte!
Thanks a mill in advance!
 
If your public sector income is less than €115,000 per year then yes, you can make contributions into a Personal Pension or PRSA separately in respect of your private income. Cornmarket can probably arrange this for you, but Cornmarket have a reputation for being expensive and as they're owned by Irish Life, you might end up with an Irish Life product.

Some of the following posters are brokers that contribute to this board for free. In alphabetical order ... @GSheehy (Gerard Sheehy), @LDFerguson (Liam D. Ferguson), @Marc (Marc Westlake), @Steven Barrett - Google any of them and you should be able to contact them in the real world.
 
You don't have to keep your AVCs for your public sector employment with Cornmarket. If you decide to follow Dave's advice and open your PRSA with a broker, you could ask the broker to set up an AVC PRSA for your PS earnings. This would likely cost less than Cornmarket.
 
A PRSA AVC to max out your public service pension and a PRSA for the private practice up to total earnings of €115,000.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Many thanks everyone. I appreciate you all getting back to me. I will study these options.
 
Dave Vanian said:
If your public sector income is less than €115,000 per year then yes, you can make contributions into a Personal Pension or PRSA separately in respect of your private income. Cornmarket can probably arrange this for you, but Cornmarket have a reputation for being expensive and as they're owned by Irish Life, you might end up with an Irish Life product.

Some of the following posters are brokers that contribute to this board for free. In alphabetical order ... @GSheehy (Gerard Sheehy), @LDFerguson (Liam D. Ferguson), @Marc (Marc Westlake), @Steven Barrett - Google any of them and you should be able to contact them in the real world.
Click to expand...
Apologies for bumping this thread but, Dave, would you mind clarifying the first line here....if I have both public and private sector employments and the public sector salary is greater than 115k then I cannot continue contributing to my private sector PRSA? Does it make a difference if my private sector employment is within my own limited company?
 
poorrelative said:
Apologies for bumping this thread but, Dave, would you mind clarifying the first line here....if I have both public and private sector employments and the public sector salary is greater than 115k then I cannot continue contributing to my private sector PRSA? Does it make a difference if my private sector employment is within my own limited company?
Click to expand...

For dual income like what you describe, for the purpose of personal contributions, you've used up your €115,000 salary cap in your pensionable public service job. You can make AVC contributions within usual limits in respect of this income alone.

You can't make personal contributions in respect of your private income. However, as it's set up as a company, your company can make employer contributions to a Master Trust or a PRSA.
 
Dave Vanian said:
For dual income like what you describe, for the purpose of personal contributions, you've used up your €115,000 salary cap in your pensionable public service job. You can make AVC contributions within usual limits in respect of this income alone.

You can't make personal contributions in respect of your private income. However, as it's set up as a company, your company can make employer contributions to a Master Trust or a PRSA.
Click to expand...
Thanks Dave, got it
 
Dave Vanian said:
You can't make personal contributions in respect of your private income. However, as it's set up as a company, your company can make employer contributions to a Master Trust or a PRSA.
Click to expand...

How would one determine what's appropriate here? Say 50k distributable, 10k salary, 40k contribution for example? Does it depend on external factors such as having that additional salary?
 
Itchy said:
How would one determine what's appropriate here? Say 50k distributable, 10k salary, 40k contribution for example? Does it depend on external factors such as having that additional salary?
Click to expand...

If it's a PRSA, employer contributions are unlimited. So once you're an employee of the company, the company can put any amount they like into a PRSA. Salary sacrifice is forbidden and the €2 million Standard Fund Threshold applies.

If it's a Master Trust, Occupational Pension Scheme funding rules apply - calculations based on salary, service and other pension benefits.
 
Dave Vanian said:
If it's a PRSA, employer contributions are unlimited. So once you're an employee of the company, the company can put any amount they like into a PRSA. Salary sacrifice is forbidden and the €2 million Standard Fund Threshold applies.

If it's a Master Trust, Occupational Pension Scheme funding rules apply - calculations based on salary, service and other pension benefits.
Click to expand...
Dave would you mind explaining the restrictions that apply with a Master Trust.....Recently my pension provider for my Ltd company changed everyone's PRSA to a Master Trust (it is 5% personal contribution and 5% employer). I am considering going full time with my company and was planning on taking a salary of 42k (no personal contribution) and then have the company contribute 58k to pension. If this is feasible does this also mean that if i retire on 42k salary that my final pension cannot equate to more than 2/3rds of 42k or would it be 2/3rds of 100k (total renumeration package)?
 
poorrelative said:
Dave would you mind explaining the restrictions that apply with a Master Trust.....Recently my pension provider for my Ltd company changed everyone's PRSA to a Master Trust (it is 5% personal contribution and 5% employer). I am considering going full time with my company and was planning on taking a salary of 42k (no personal contribution) and then have the company contribute 58k to pension. If this is feasible does this also mean that if i retire on 42k salary that my final pension cannot equate to more than 2/3rds of 42k or would it be 2/3rds of 100k (total renumeration package)?
Click to expand...

If your contractual salary is €100,000 a year then what you suggest is known as Salary Sacrifice and is forbidden by Revenue. I'd discuss this with the scheme's financial broker and company accountant before going ahead.

Leaving that aside, the answer to your final question is that the calculations would be based on €42,000 salary. The maximum of 2/3 final salary would require you to have at least 20 years' service if you're taking any other pension benefits into account or 40 years if not.

These are not small sums of money and there's a lot of rules applicable. I would make sure to get written confirmation from your financial broker that everything you propose is permissible and within limits before proceeding.
 
Dave Vanian said:
If your contractual salary is €100,000 a year then what you suggest is known as Salary Sacrifice and is forbidden by Revenue. I'd discuss this with the scheme's financial broker and company accountant before going ahead.

Leaving that aside, the answer to your final question is that the calculations would be based on €42,000 salary. The maximum of 2/3 final salary would require you to have at least 20 years' service if you're taking any other pension benefits into account or 40 years if not.

These are not small sums of money and there's a lot of rules applicable. I would make sure to get written confirmation from your financial broker that everything you propose is permissible and within limits before proceeding.
Click to expand...
Thanks for the reply Dave...Apologies I forgot to mention that I am currently taking a salary of less than 42k from the company as I am only part-time so strictly speaking would this still be seen as salary sacrifice if I have never earned more than 42k (albeit part-time)? I will definitely seek professional advice before making any move.
 
Revenue have this to say... "Any arrangement under which an employee waives an entitlement to remuneration or accepts a reduction in remuneration, in return for a corresponding payment by the employer into a pension scheme, is considered to be an application of the income earned by the employee rather than an expense incurred by the employer."

My interpretation of that is that you are waiving an entitlement to remuneration for your extra hours' work and as such this would be salary sacrifice. But please don't take my interpretation as gospel. Talk to an accountant who has full details of your contract in front of them etc.
 
sorry... bumping this thread to get some clarity on the practicality of having 2 x PRSAs for relatively small dual incomes - one as ltd co dir and one from public service part-time PAYE - if I am effectively part-time in both employments and not likely to ever max out any contribution limits in either scenario - what are the advantages of having 2 x separate contributions in separate contracts over say having a single larger contribution to either a ltd co director prsa or the occupational SPS AVC scheme that would allow me to have lower AMCs. Assuming both would end up in generic world index funds for the next 20 years. Is the extra admin overhead worth the flexibility of having two separate products? Are there any other factors to be considered?
 
If the costs are lower in the AVC scheme and you make all contributions to this scheme, you will be limited to taking the benefits at the time you begin your Public Sector pension.

You would also be limited in the amount of tax free lump sum you would be entitled to. This will only be what is allowed to reach the revenue maximum on top of what you have already received from your Public Sector scheme.

You could lose out on possible extra tax free lump sum available if you had extra contributions in your private scheme.

You could benefit from the PRSA contributions to your private scheme at a retirement date of your choosing.
 
S class said:
You could benefit from the PRSA contributions to your private scheme at a retirement date of your choosing.
Click to expand...
Thanks S Class - I do prefer the flexible option of 2 x products for the reasons you mention - was just concerned that splitting the pot was perhaps weakening the overall position and also increasing my admin and costs. As you say having the choice in the future is a major benefit.

So if I go the execution only route it should be straightforward in terms of admin - I'm happy with my investment "strategy" and have already reviewed my financial position as a whole - it was really just the practical application.

I prefer to keep it as simple as possible and light touch. Has anyone else done something similar?

The AAM pension threads are full of great info (in particular S Class and other regulars) but I haven't found too many people in this situation except for examples of HSE consultants etc at the top end income wise, which I certainly am not. Happy to take any critique! Thanks again.
 
I had two separate schemes related to my one employment for many years. The AVC scheme is very handy because everything is done automatically. Tax and wage deductions all done at source.

The separate PRSA takes a small amount of effort to set up and operate. This can be minimised by setting up regular Direct Debit payments and setting up ongoing tax relief.

Yes it's straightforward to set up an execution only PRSA.

You will learn a lot about pensions in general and claiming tax relief by operating your own PRSA.

You will get confident claiming yearly tax relief.
This is a good habit as you are more likely to also claim any other tax relief you might be due.
 
The following brokers who offer execution only PRSAs might be worth checking out:
www.ferga.com

Ferguson and Associates

Pensions (including Self Administered) Life Assurance - Income Protection Savings - Investments
www.ferga.com www.ferga.com

PRSA Ireland | PRSA.ie

Low Cost Pensions Ireland Zurich LIfe The Value Pension Website Execution Only PRSA AVC PRSA Pensions www.prsa.ie
www.prsa.ie www.prsa.ie
This thread may also be of interest to you:

Probably the best (cheapest) PRSA in the world?

The launch of Royal London Ireland's new pension product in late November 2024 seems to have finally offered customers accessible, lost-cost PRSAs. Through an execution-only broker, it is relatively easy to access a passive fund AMC of 0.55% or significantly lower on larger transfers. Taking...
www.askaboutmoney.com
 
You must log in or register to reply here.
Back
Top