Company contribution or AVC from salary?

Brendan Burgess

Brendan Burgess

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I had always assumed that it's better for a company to make a pension contribution on behalf of an employee as there would be no PRSI or USC.

Are there advantages on retirement though in having some of the fund in an AVC?

Take someone with long service and a pension fund where it's better to take 1.5 times the person's salary rather than 25% of the fund.

Company pension fund: €200k
Salary: €100k

They are thinking of contributing €40k to a pension.

If they contribute it as an AVC, is the following correct:

tax-free lump sum on retirement from company pension fund: €150k - €50k used to buy an annuity. .
tax-free lump sum from AVC: €10k

If the company puts the €40k into the pension fund, it won't increase the tax-free lump sum as it's already maxed.

Brendan
 
Nope, doesn't work Brendan. The 150% lump sum is a once off payment. You can't then take a 25% lump sum from the AVC. Your original thinking is the correct way of thinking and the rest of it is incorrect.



Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Brendan Burgess said:
Thanks Steven

So if you take 150% from the company fund, the entire AVCs must go into the ARF?

Brendan
Click to expand...

Not necessarily. You can also buy an annuity with it or take it as taxed cash. In the case of DB pensions, it may be used to fund the tax free lump sum (using the 150% of final salary method).

Where you opt for a tax free lump sum, it is either 150% of final salary or 25% of the value of your entire fund. You can't mix and match.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Can I chime in here with a question Steven? Is the 150% of final salary predicated on buying an annuity and the 25% predicated on buying an ARF or can you chose either tax free lump sum and buy either an annuity or ARF with the balance?
 
ivannomonet said:
Can I chime in here with a question Steven? Is the 150% of final salary predicated on buying an annuity and the 25% predicated on buying an ARF or can you chose either tax free lump sum and buy either an annuity or ARF with the balance?
Click to expand...

Yes, if you chose the 150% tax free option, you must purchase an annuity with the remainder of the fund with the exception of AVCs, which can be used to invest in an ARF.

If you take the 25% tax free lump sum option, you have to invest the remainder in an ARF. With the exception that you can use the €63,500 that is earmarkeed for an AMRF and purchase an annuity with that amount to satisfy the AMRF requirement. You ARF can also purchase an annuity at a later date.


Pension rules, keeping me in work since 2002 ;)


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
SBarrett said:
If you take the 25% tax free lump sum option, you have to invest the remainder in an ARF. With the exception that you can use the €63,500 that is earmarkeed for an AMRF and purchase an annuity with that amount to satisfy the AMRF requirement. You ARF can also purchase an annuity at a later date.
Click to expand...

If you take the 25% tax-free lump sum option, you can choose to reinvest the other 75% in an annuity.
 
Hi is it possible for a nurse trained in U.K. to buy back her student years as I will be short years upon retiring and it seems unfair that Irish student years can be purchased and not U.K. years
 
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