Difference between AVCs and PRSA AVCs?

Hi there, I am a mid-forties secondary school teacher and I am planning to set up an AVC. I have been researching which company to go with and would be keen to avoid unnecessary fees from dealing with Zurich or Cornmarket direct.

I know there are execution only companies that offer savings but they seem to offer PRSA AVCs as opposed to the AVCs offered by Cornmarket and others. Does anyone know what the difference is between the two types of AVCs? Perhaps they are the exact same same.

Also, I wonder if I were to use a company like Labrokers or PRSA.ie can I just make a lump sum investment each year instead of using salary decision on a fortnightly basis? Then I could foreseeable just claim this back from Revenue after the end of the tax year where I made the contribution.
Thank you for taking the time to read my mail and for taking the time to respond.

Derek

I'd say you can make one-off lump-sum single premiums to an AVC, and manually claim the tax relief in your Form 12 tax return.

Note that the AMCs on lump-sum single premium may be different than on regular premium.



Alternatively, you could make monthly contributions from your bank account, and get the tax relief "coded-in" to your tax credits and SRCOP, so that the tax relief is delivered at source.

Derek1001 said:

I know there are execution only companies that offer savings but they seem to offer PRSA AVCs as opposed to the AVCs offered by Cornmarket and others. Does anyone know what the difference is between the two types of AVCs? Perhaps they are the exact same same.

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An AVC (via Cornmarket in your case) has its contributions directly deducted by your pay department. The tax relief is already applied and reflected in your wages. In this regard it is administration free.

Other providers don't have this facility with your wage department. You make the arrangement directly with them and set up contributions via bank transfer from your bank account. In order to get the tax relief you have to do this with Revenue (via MyAccount usually) and they will adjust your tax allowances. Your employment office is not involved. This is an PRSA-AVC. You can choose your provider - some come with advice (on funds, investment strategy, etc) and some are "execution only". Fees and charges vary.

Otherwise they are the same thing. Benefits from both are linked to main scheme benefits in the same way.

AVCs are the scheme run by an employer. The employer agrees to deal with one or more providers and facilitates deduction of contributions at source from your wages. You can also pay lump sums directly to the provider.

An AVC PRSA is a separately set up scheme that your employer has no input into. You set it up directly with a provider and your employer has no rights to be informed about this scheme.
The employer will probably refuse to arrange deductions at source from this scheme.

You can make monthly direct debit payments or lump sum bank payments to an AVC PRSA and you can get tax relief coded in as stated above.

Other than that both are basically the same. You might have a bigger choice of investment funds in the AVC PRSA. Both can only be funded and tax relieved from earnings from the same employment.

You can have either or both schemes.
At all times you are the owner of all funds in both schemes.

At retirement the same rules apply to both. The total funds can be combined and you can choose your own benefits. These are, top up your revenue allowable tax free lump sum, take a taxable lump sum, set up an ARF or Annuity. You can take a combination of all these.

You could for example combine all the funds to set up one ARF.

One advantage of setting up your own AVC PRSA is that it is a very good way of learning about pensions. You will have an added interest and this could be useful in the future when you are planning for your retirement.

And to add to that with an AVC you will need to start drawing down funds at retirement age (end of contract) and perhaps later but with the approval of the trustees and employer.

You may find that your pension/s pot/s are giving you an optimum income via the ARF or annuity bought and you may not want to withdraw more funds at that stage avoiding too paying a bigger amount of tax on it (ie moving from 20% to 40%). Or you may want to preserve your fund value at that stage. That is when the PRSA AVC is of your advantage.

With a PRSA AVC you have.more control and flexibility. Not only you can buy an annuity or ARF, you can also decide to leave it as it is. You can continue investing into your PRSA AVC and/or withdraw your money (any amount you want) at a later stage.

Main Scheme = Occupational Pension Scheme

AVC = Occupational Pension Scheme

PRSA AVC = Not Occupational Pension Scheme

Both products regulated by Pensions Authority. Both with different disclosure rules i.e. that AVC doesn't have any disclosure requirement and the PRSA AVC does.

Disclosure = Statement of Reasonable Projection (projected values on growth and values with/without the application of charges + intermediary remuneration disclosed.

Greater clarity on AVC PRSA, IMHO.


Gerard

www.execution-only.ie