Max Lump Sum

P

Placeinthesun

Registered User
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Wondering if anyone can advise on questions below - thanks.

Scheme is DB scheme with career average earnings.
Salary 150k and allowance/bonus of 17k. (Total 167k).
No entitlement to state pension.
At 40 yrs service , pension statement says I’ll get 200k lump sum and 67k pension. (Note: Not 225k and 75k due to career averaging element of this DB scheme.)

Revenue max lump sum allowable is 1.5 times …… ( 150k or 167k)?

A) what is max lump sum I can attain (by using AVC to top up) 225k (150 * 1.5) or 250k (167 * 1.5) ?

B) how is a persons DB scheme entitlement calculated with regards to SFT of 2m.
Eg is it (67k pension * ‘x’ years) + lump sum . What value is ‘x’. Eg 25, 30 years ?

C) with 8 yrs to retirement is it better to start an AVC and build up to max the lump sum over those years OR just wait and do a last minute AVC ? Is their more risk with 8 year approach in that investment could hit bad performing time whereas in the last minute version, do you just put in required amount to max the lump sum and then literally withdraw next day ( ie day of drawing down pension lump sum)?

D) can I also use AVC to build up an annual pension of extra 8k (75k - 67k) or 16k (83k - 67k) ? Just curious on this question but unlikley to do even if possible.

Thanks.
 
A)

Maximum lump sum is 1.5 times of whichever of the 3 Definitions below results in the highest amount.


Remuneration can be defined as total of basic pay plus overtime payments, bonuses, commissions, fees, etc. assessed to tax under the PAYE system (i.e. Schedule E), including the value of any benefit-in-kind.

In determining “Final Remuneration” for maximum allowable benefits purposes, the Revenue will allow the use of any one of three different definitions, provided you are not a ‘20% Director’ (in which case Definition 2 must be used).

Definition 1.
Basic salary over any twelve month period in the five years before retirement, plus
the average of any fluctuating emoluments (commission, bonuses, benefit-in-kind, etc.), over three or more consecutive years, ending on the last day of the twelve month period chosen.

Definition 2.
The average of total emoluments (income taxed under Schedule E) for any
three or more consecutive years, ending not earlier than ten years before retirement.

Definition 3.
The rate of basic pay at retirement, or at any date within the year ending on the
retirement date, plus the average of any fluctuating emoluments (commission, bonuses, benefit-in-kind, etc.) over three or more consecutive years, ending on the day used to determine basic pay.
 
A) 167k is the relevant number, but it'll be calculated as per @S class

B) lump sum plus the pension entitlement multiplied by a factor as set out in Revenue's Pension manual. It's 20 or higher.

C) Depends on your attitude to investment risk.
 
Is there also a max amount of money tax free that you can put into the AVC every year. This may mean that leaving it to the end might be to late.
 
DingDing said:
Is there also a max amount of money tax free that you can put into the AVC every year. This may mean that leaving it to the end might be to late.
Click to expand...
That’s a very good point.
I think I’d only be permitted to put in around 36k in the last minute AVC contribution (With the ‘115k max allowed’)
So would have to build up the other 14k or so into AVC in advance of that.
 
Placeinthesun said:
That’s a very good point.
I think I’d only be permitted to put in around 36k in the last minute AVC contribution (With the ‘115k max allowed’)
So would have to build up the other 14k or so into AVC in advance of that.
Click to expand...
I was just working through mine recently and I need to split it over last year and this year and it is still limiting what I can get on the marginal rate.

It is a % of your income each year that you can put into your pension, and your other pension contributions from your employer to your occupational pension scheme count as well.

I think its 35% and 40% if you are over 60, but check this out, I have not looked it up lately.
 
Last edited:
Yes 40% for 60 and above. Any employee (%) contributions to scheme need to be deducted from the 40%.
 
Thanks and I noted I made a mistake in my previous post, It looks like I was including any employer contributions to the pension which was not the case, as @Placeinthesun said, its your contributions to your occupational scheme. I have amended the post now..
 
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