How do lump sum AVCs work in practice?

[DublinHead54]

Hi,

If I want to pay a lump sum at the end of each year into my employer pension to max contributions how does it work in practice for tax relief? For example if I can make a 10k payment at 40% relief. Do I pay 10k and get refunded through PAYE the 4k or do I just pay 6k?

I understand that if I up my monthly contributions through my employer the tax relief is given through payroll, but wondering how it works in practice for a one of lump sum.

 

[Calico]

You pay the full amount and then apply to Revenue for the refund by filling out a Form 11.

You'll need proof of the contribution from your pension provider.

 

[DublinHead54]

You pay the full amount and then apply to Revenue for the refund by filling out a Form 11.

You'll need proof of the contribution from your pension provider.

To fill out a form 11 do you need to be registered for ROS?

 

[Redzer]

If you make the AVC before the end of October (rather than year end) you may have the option of availing of the previous years Age Limit Tax Relief if you haven't already maxed your previous contributions.
You'll probably need to complete an AVC form from your pension provider which includes Bank Transfer details or you could possibly send them a cheque. Best to not leave it to the last minute as deadline is strict. Also watch out for bank transfer limits for new payees which may limit what you can transfer on the first payment day to limit potential fraud.

 

[DublinHead54]

Another silly question, the threshold only includes my contributions and not my employers? So If I earn 115k and I am in the 20% threshold and pay in a gross 13k contributions I can pay in another 10k in a lump sum at a relief of 40%? (115 x 0.2) - 13k = 10k.

 

[Flybytheseat]

Another silly question, the threshold only includes my contributions and not my employers? So If I earn 115k and I am in the 20% threshold and pay in a gross 13k contributions I can pay in another 10k in a lump sum at a relief of 40%? (115 x 0.2) - 13k = 10k.

Yes - that is correct

 

[phoenix53]

Does the fact that the employers contributions are no longer included in the threshold apply to defined contribution company schemes as well as PRSAs?

 

[Freelance]

They reduce the credits to account for an annualised DSP payment. Contact Revenue to say you are not in receipt and they will adjust you back to cumulative tax basis. Otherwise, it will regularise at the end of the year.

I don't believe the employers contribution ever counted towards the €115k limit in the case of DC schemes.

 

[phoenix53]

I don't believe the employers contribution ever counted towards the €115k limit in the case of DC schemes.

Ok, so the employee could always contribute the full threshold amount themselves. Never knew that. Thank you.

 

[Calico]

To fill out a form 11 do you need to be registered for ROS?

No, you can do it through Revenue's myaccount platform.