Difference between AVCs and PRSA AVCs?

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Derek1001

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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.
 
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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.
 
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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
 
I thought an AVC and a PRSA AVC would both have to be "retired" when you retire? Because contributions in to each come from the same source of income... your salary. Isn't that what @S class meant: that the rules are (mostly) the same for each?

What I'm wondering is... With an AVC there is a limit to how much can be in that fund isn't that right? It's not the max fund threshold (soon to be €2.8m) but a limit determined by how big your public sector pension is allowed to be given your salary. See thread: The Single Public Service Pension Scheme for details.

If as @S class says with an AVC PRSA: "You set it up directly with a provider and your employer has no rights to be informed about this scheme." Does that mean if you had enough working years to make contributions into both and a big enough salary you could max out your AVC to the allowed public sector limit as per your salary and use the PRSA AVC to reach the standard fund threshold (e.g.: €2.8m) all with just one source of income.. your salary?

Or maybe for the same reason you could keep contributing to the PRSA AVC after "retiring" the AVC? Even then there is a limit of 71 I think?
 
AVCs can be funded up to the revenue allowed maximum.
This is a pension of 66.66% of final salary.

Public sector pensions, even with 40 years service (120/80 tax free lump sum + 40/80 pension) do not reach this revenue allowed maximum.

You can have your maximum public sector pension + an ARF or Annuity (or both) + state contributory pension.

There is more information about this on this thread.
This applies to all Public Sector pension schemes.

AVC information for pre 95 Public Sector employees.

Can these employees make AVCs ? Yes. They can make AVCs based on non pensionable wage payments and to make up for any shortfall if they don't have the full 40 years service at retirement age. They can also make AVCs to fund for the revenue allowed 100% surviving spouses pension. The public...
www.askaboutmoney.com
 
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GSheehy is talking about the AVC as part of the main scheme, I am making the difference between the two schemes.

@CharlieMac
The AVC as part of your OPS (ie via your employer) needs to be actioned when you retire. It is then when you buy a PRSA/ANNUITY and from that point you are obliged to withdraw your funds every year.

However the PRSA AVC as explained is different as at retirement you can leave the remaining funds in your PRSA and withdraw from them at any time. If you decide to buy an ARF then the corresponding rules will apply here too.
 
The rules for taking retirement benefits from AVCs and AVC PRSAs are exactly the same.

Benefits from both must be taken at the same time that benefits are taken from the occupational scheme.

In my case I more or less didn't bother to persue taking benefits for both my AVCs and AVC PRSA. It was about a year after starting my occupational pension when I got around to sorting this out.

Neither of the providers chased me up about this.

I had to initiate the benefit taking procedure for both.

My employer had no input into arranging benefits from my AVCs.
This was done by Irish Life after I requested it.

The AVC PRSA was done by Zurich after I requested it.

Maybe I could have delayed the AVC PRSA for longer.
I don't know if there would have been Revenue implications if I had done this.

I began my occupational pension at age 60 and my ARF was set up at age 61, so there was no imputed distribution involved.
If I had dragged this on longer I suppose there would be tax issues.
 
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Info from Irish life on the AVC PRSA and what you can do:

"When you retire, you can decide to take the AVC fund in the following ways:
1. Use it to make up any retirement lump sum shortfall you may have under your main scheme.
2. Buy an annuity (to add to any shortfall under your main scheme).
3. Continue investing in your PRSA up to age 75 or in an approved retirement fund (ARF), or approved minimum retirement fund (AMRF)."
 
VInterested said:
Continue investing in your PRSA up to age 75 or in an approved retirement fund (ARF), or approved minimum retirement fund (AMRF)."
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This becomes a vested PRSA and is subjected to 4% drawdowns or imputed distributions. It is similar to an ARF.

"Continue investing in" is misleading. They probably mean that the investment product remains in place. If you make any more contributions into it you cannot get tax relief.

If you had post retirement earnings from another employment you would need a separate PRSA in order to continue getting tax relief on pension contributions.
 
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VInterested said:
Info from Irish life on the AVC PRSA and what you can do:
https://www.irishlife.ie/sites/retail/files/avc-and-your-prsa.pdf
"When you retire, you can decide to take the AVC fund in the following ways:
1. Use it to make up any retirement lump sum shortfall you may have under your main scheme.
2. Buy an annuity (to add to any shortfall under your main scheme).
3. Continue investing in your PRSA up to age 75 or in an approved retirement fund (ARF), or approved minimum retirement fund (AMRF)."
Click to expand...

For clarity, you can NOT continue to contribute to an AVC PRSA after you have retired. You can leave the fund in the AVC PRSA where it continues to be invested. Same rules as if it was an ARF. It becomes a Vested AVC PRSA.

The Irish Life document is a bit out of date. Finance Bill 2021 abolished AMRFs with effect from 1/1/2022.
 
Hi, does anyone know if I want to retire early but don't want to take my public sector pension until normal retirement age to avoid a large reduction (cost neutral early retirement) can use my AVC funds through an ARF to fund my retirement until I draw my occupational pension.
 
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