Should I stop contributing to PRSA AVC ?

L

lawoman

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Pre 1995 Public servant . PRSI Class D Single . Home owner . Mortgage paid off . Have 38 years service . Age 57. Current salary 65k .
About 25 years ago I toyed with the idea of taking a career break and in preparation for the pension shortfall I started a PRSA . Career changed course for the better and I never took the career break so have no break in service . Continued to pay into AVC and fund growth was very good.
My questions are ;
If I continue to work for the next 2 and a half years ( accumulating full service ) and continue to pay into AVC will I risk running into a situation where the proceeds of the ARF will simply be taxed at 52 per cent ?
Should I stop paying into AVC immediately ?
Can I retire early and use the AVC funds built up as my only income until I qualify for public service pension ?
 
Hi, I'm not sure if I have an answer.

But I'd suggest you'd get more responses in the public sector pensions sub forum, if one of the moderators could move this for you.
 
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What’s the current (ballpark) value of the AVC PRSA?

I’m guessing you will be entitled to a (public sector) pension of around €32k per annum, plus a lump sum, on retirement but you might confirm.
 
Sarenco said:
What’s the current (ballpark) value of the AVC PRSA?

I’m guessing you will be entitled to a (public sector) pension of around €32k per annum, plus a lump sum, on retirement but you might confirm.
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Yes. If I continue to work to Normal Retirement Age, , I would get a pension of 32k and a lump sum of approx 90k
Current value of AVC is approx 250k
 
If you retire early and start an ARF, you will have an opportunity to gain reckonable prsi contributions to assist you to qualify for a partial contributoty pension. Provided you make yearly drawdowns of at least 5000 euro you will gain 52 class S contributions per year until your chosen contributory pension start date.

You cannot access your AVCs until you start your PS pension, so you would not be able to have AVC income pre PS retirement.
 
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lawoman said:
Yes. If I continue to work to Normal Retirement Age, , I would get a pension of 32k and a lump sum of approx 90k
Current value of AVC is approx 250k
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Wouldn’t you be entitled to those pension entitlements @65, even if you stopped working @60 (by which time you would have 40 years’ service)?

If you drew down @4% pa from an ARF of €250k, that would give you an additional €10k pa in pension income - or €42k in total.

That would bring you into the higher income tax rate band and I suspect that’s what prompted your original question.

Maybe you should be thinking of taking cost neutral early retirement @60. That would obviously lower your public sector pension payments somewhat but, as @S class says, you could start generating PRSI stamps from the ARF drawdowns.
 
If you're on the pre 95 pension scheme, is your normal retirement age 60?

You're 57 now with 38 years service so will have your full 40 years service at 59 and your nra is 60.

I'm interested to hear what implications this will have on your avc drawdown.
 
Retire at 60 with a PS pension of 32k and take 10k per year from ARF to bring you to 42k which means you pay no tax at 40%. Presumably the 40% cut-off will rise in coming years so you could just keep topping up your PS pension with the ARF to ensure you are always at the cut-off
 
I thought class D public servants do not receive state pension?
 
poorrelative said:
I thought class D public servants do not receive state pension?
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Most probably don't qualify.

However it is possible for them to qualify for a partial contributory pension. Especially if they take early retirement and gain class A contributions up to the age they claim their contributory pension. This is currently up to age 70.
 
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Are class D public servants not entitled to apply at 66 since they would, I think, be pre 1995?
 
Slim said:
Are class D public servants not entitled to apply at 66 since they would, I think, be pre 1995?
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That should have read "up to age 70". I mentioned age 70 to show that there is now extra time for pre 95s to gain enough Prsi to qualify for the contributory pension. Anybody aged 66 from 01/01/ 2024 can choose to start from age 66 to 70.
 
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S class said:
That should have read "up to age 70". I mentioned age 70 to show that there is now extra time for pre 95s to gain enough Prsi to qualify for the contributory pension. Anybody aged 66 from 01/01/ 2024 can choose to start from age 66 to 70.
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That's interesting, thanks, S class. As always, you're a mine of information!! Happy New Year!
 
lawoman said:
Yes. If I continue to work to Normal Retirement Age, , I would get a pension of 32k and a lump sum of approx 90k
Current value of AVC is approx 250k
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Hi
Thanks for all the replies .
I intend to immediately stop making contributions to the AVC .
I will also consider taking a career break from about 59 ,effectively retiring .
No point in making contributions now and continuing to work as normal, only to be taxed to the hilt on the excess after I retire .
Thanks again
 
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