Minimum pension needed to avail of AVC's?

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ricta

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Hi,
my wife is thinking of making a lump sum payment as an AVC, I have been warned, however, to be careful, because if she doesn't retire with a pension (DB in her case) of at least €10,000, she will not be able to use her AVC fund without paying tax on it. Does anybody know of a requirement to have a minimum pension like this? She's trying to find out what her current projected pension will be if she works to normal retirement age, it is quite possible it will be below €10,000 due to short years of service.

thanks in advance.
 
When your wife retires, once she has taken her maximum tax-free lump sum entitlement, any further income from her pension arrangements (including AVCs) will be taxable. She might or might not be in the tax net at all at that time. A married couple with one partner over 65 can earn up to €38,000 per year in total and be exempt from Income Tax. This threshold will change between now and when she retires.

She may be getting confused advice re her options at retirement, which have nothing to do with the tax treatment. If she has a guaranteed lifetime income of at least €12,697 per year from other sources (including the State Pension) she can invest her AVC fund into an Approved Retirement Fund. If not, she must either buy an annuity with it or invest it in an Approved Minimum Retirement Fund.
 
If she doesn't have a guaranteed lifetime income of at least €12,697 per year from her DB pension and the State Pension combined, can she avail of a tax-free lump sum at all? Someone in Mercer says that she would not.
 
ricta said:
If she doesn't have a guaranteed lifetime income of at least €12,697 per year from her DB pension and the State Pension combined, can she avail of a tax-free lump sum at all? Someone in Mercer says that she would not.
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She has an entitlement to a tax-free lump sum at retirement, regardless of how big or small her benefits may be.

The limit of €12,697 per annum only applies to her eligibility to invest her AVC fund in an ARF.
 
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