Eddie Hobbs on tiktok strongly advising against the purchase of AVCs

My wife just received a quotation for purchasing 1 year NS with exactly 4 years remaining (retiring at 60). Her salary is € 71,456 and she started working in the PS in 1999. Lump sum cost = € 18,221. Annual cost € 4,612. This would equate to an additional annual pension of € 547 and additional TFLS of € 2,680.

She is at the top of her scale and the only future pay rises are likely to be the general PS wage increases (if there are any more within the next 4 years). Therefore the cost of the lump sum payment seems to be slightly better value €18,221 versus (4 x € 4,612 = € 18,448). If the cost for 1 year is €18,221 which is a net cost of €10,933 (40% tax relief). Let’s deduct the TFLS to give €8,253. Since any increase in annual pension will be taxed at 20% plus USC and PRSI then the € 547 annual increase is approx. €380 net. €8,253 / €380 = approx. 22 years to recoup the notional service cost. She would be 82.
 
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DingDing said:
Also I have critical illness through a union and the critical illness product has a number of additional products bundled into it which increase the charges to the client.
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This is a bugbear of mine. Salary protection with Cornmarket as recommended by the INTO includes compulsory life insurance which I don't need as I already have mortgage related life insurance and no dependents.
 
@poorrelative

What you have to do now is calculate what the four years contributions to a low cost AVC PRSA might be worth in four years time, deduct the tax-free-cash and get an annuity quote (it's probably too low in this case) for the balance based on a like-for-like eg. is the €547 level/increasing and is there a spouses pension of 50%/100%.

The current joint life annuity rate for €20,000 for F & M aged 60, guaranteed for 10 years, spouses 50% is circa 4.7% pa . But, we've no idea where rates will be in 4 years time.


Gerard

www.prsa.ie
 
GSheehy said:
What you have to do now is calculate what the four years contributions to a low cost AVC PRSA might be worth in four years time, deduct the tax-free-cash and get an annuity quote (it's probably too low in this case) for the balance based on a like-for-like eg. is the €547 level/increasing and is there a spouses pension of 50%/100%.
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Yes the €547 increases with public sector wage agreements so probably a bit less than inflation. Its 50% spouses pension. Also worth considering that the notional service in this case would bring total reckonable years to 20, thus allowing 120/80th TFLS top up by AVC, so here perhaps a combination of both AVC and notional service may make sense.
 
ClubMan said:
The Pensions Authority cover Purchase of Notional Service (PNS) and AVCs and the pros and cons of each here.

https://www.pensionsauthority.ie/en/about_us/information/presentations/avcs%20and%20the%20public%20service.pptx
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ClubMan said:
The Pensions Authority cover Purchase of Notional Service (PNS) and AVCs and the pros and cons of each here.

https://www.pensionsauthority.ie/en/about_us/information/presentations/avcs%20and%20the%20public%20service.pptx
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Link doesn't seem to work
 
@mmclo I am interested in same but the file appears to be missing from the web site, it was a presentation from 2014. I have sent an enquiry through to the Pensions Authority.
 
@mmclo as attached and received today from the Pension Authority, their website is currently being updated
 

Attachments

  • Thursday 22 May 2014 - Presentation for IPA Pensions Forum – AVCs and the Public Service – Pow...pdf
    763.6 KB · Views: 40
Great info here.
From the slides it seems you can't purchase NS if you will have full service by your normal retirement age. I never knew this and had thought if you wanted to retire at 60 (NRA being 65) you could buy 5 years NS and then take CNER. IN this case, am I right that AVCs are the only option if choosing to retire early when it's possible to work full service?
 
Am availing myself of PNS, looking to use AVCs to top up and use my max thresholds over the next few years. If I go early then AVCs are what my employer recommends.
 
messyleo said:
Great info here.
From the slides it seems you can't purchase NS if you will have full service by your normal retirement age. I never knew this and had thought if you wanted to retire at 60 (NRA being 65) you could buy 5 years NS and then take CNER. IN this case, am I right that AVCs are the only option if choosing to retire early when it's possible to work full service?
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I'm in the same boat.

Currently able to have 42 years service as started in public service at 23. I plan on a 5 year career break, taking my service to 37 years. But I cannot purchase NS until after the career break, which will cost more as nearer retirement and higher up my scale + pay rises in interim
 
TheJackal said:
I'm in the same boat.

Currently able to have 42 years service as started in public service at 23. I plan on a 5 year career break, taking my service to 37 years. But I cannot purchase NS until after the career break, which will cost more as nearer retirement and higher up my scale + pay rises in interim
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Would you consider an AVC instead so? It is very restrictive and a condition I didn't realise until this thread!
 
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