Increasing contributions V AVCs

jethrothe2nd

Registered User
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I'm totally confused about the best way to approach my pension situation. I currently contribute 5% with my employer contributing 6%. I have been paying €100 a month into AVCs for the last couple of years and have just increased that to €200 I'm not sure I'm doing the most appropriate thing though. Would I be better off increasing the contribution % instead of buying AVCs, or is it essentially the same thing?
 
Essentially the same, but you should check the different charging structures -
- the annual management charges
- any up front charges (allocation rate).
Maybe the Employer scheme offers a lower charging structure, but you need to check.
 
One difference between an AVC and an ordinary scheme contribution is the control of the investment. As an entirely hypothetical example, let's say you accumulated significant funds as AVCs over a period of years and wanted to take control of how they're invested, e.g. to invest in shares or ETFs of your own choosing, or buy a property if the sums were large enough. You can transfer an AVC fund to an AVC PRSA product of your own choosing, including self-directed AVC PRSAs. If you have accumulated all your pension fund as ordinary scheme contributions (not AVCs) and are still an active member of the pension scheme, you can't transfer out to an AVC PRSA.

But this only would be of interest to a finite group of people. For many, the fund choices already available in a pension scheme are perfectly adequate for their needs.

Regards,

Liam
www.ferga.com
 
Hi Liam,

Am I understanding you correctly above when you say "You can transfer an AVC fund to an AVC PRSA product of your own choosing" you mean an existing AVC sum/fund?
So say I have a large amount of AVC contributions to my employers scheme built up over a number of years and decide I'd like to move them into a private PRSA I can do so and without penalty?
Many thanks.
 
Hi Liam,

Am I understanding you correctly above when you say "You can transfer an AVC fund to an AVC PRSA product of your own choosing" you mean an existing AVC sum/fund?
So say I have a large amount of AVC contributions to my employers scheme built up over a number of years and decide I'd like to move them into a private PRSA I can do so and without penalty?
Many thanks.

As long as the AVCs have remained segregated and documented as an AVC fund, then yes you can. There's no penalty in terms of taxation, but you'd need to check with the pension scheme to establish whether or not there is a penalty for leaving the scheme.
 
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Thanks Liam, that's useful to know, I'll follow up with the pension provider on the mechanics of it.
 
Be clear that it's an AVC PRSA that you're setting up as the replacement, as distinct from a common or garden PRSA. You can transfer AVC funds into the former but not the latter.
 
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