Should I use savings to start an AVC or pay down a mortgage?

Thanks @Protocol. I found a brochure about Cornmarket charges online. They have a €600 once-off initial set up fee and charge 4% on lump sum contributions. They don't charge any fee on regular payroll contributions. Their annual management fee is 1% but reduces to 0.75% when your fund reaches €40k and reduces to 0.5% when the fund reaches €140k.

Are there any other providers I should know about?

As for my question (1) above I'll set up a meeting with a representative and ask them, and to explain the calculation to me. (What is the net cost to me in my 2-weekly paycheck).

Do I have no choice but to make the 2024 contributions as lump sums and not via payroll? I'd like to avoid a lump sum fee. I can ask them that too.
 
1. By how much will my 2-weekly paycheck by reduced if I max out my AVCs by making payments every 2 weeks via payroll? What would the reduction be for 25% and for 30% of gross salary since I can contribute 30% from Jan 2026.

These are simple questions that you can calculate yourself.


Assuming the whole contribution is above your SRCOP, a 100 put into AVC means a 40 tax saving, and a 60 cost to you.

You know your gross, so you can calculate 20% or 30% of your gross.
 
I think this thread is circular. You got lots of advice on selling the apartment and you haven't budged from your original position of not wanting to sell it. As I read through the thread you are moving the goalposts a bit every time advice is posted. I don't mean that to be harsh, just I don't think there is much point in giving you more advice.

I will say I have personal experience of IPF and I would not recommend choosing them for AVCs. They will hit you with an allocation charge which has been explained elsewhere. Only accept 100% allocation and maximum 1% annual fee (aim for lower).

Could you at least consider clearing your PPR mortgage balance?
 
Seaniemed said:
I think this thread is circular. You got lots of advice on selling the apartment and you haven't budged from your original position of not wanting to sell it. As I read through the thread you are moving the goalposts a bit every time advice is posted. I don't mean that to be harsh, just I don't think there is much point in giving you more advice.

I will say I have personal experience of IPF and I would not recommend choosing them for AVCs. They will hit you with an allocation charge which has been explained elsewhere. Only accept 100% allocation and maximum 1% annual fee (aim for lower).

Could you at least consider clearing your PPR mortgage balance?
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Agree with this.

@CharlieMac, forget about AVC's until you've solved the cashflow problem on your investment mortgage. You're bleeding money twice - first on interest bills for long-gone capital, and then to inflation by sitting on a significant wedge of cash.

The collective wisdom on thread pretty much unanimously agreed that you should sell the investment property, then we said clear down a sizeable chunk of the mortgage to get it cash-flow neutral as the second-best option on the basis that you wanted to hold on to the property. You're digging for the third-best option now (at best!), it's time to stop digging.

You have plenty of both disposable income and time left to make monthly AVC's from salary, but that's for an increase in pension that it's not clear you even need - you need to draft your retirement budget.
 
Protocol said:
1. By how much will my 2-weekly paycheck by reduced if I max out my AVCs by making payments every 2 weeks via payroll? What would the reduction be for 25% and for 30% of gross salary since I can contribute 30% from Jan 2026.

These are simple questions that you can calculate yourself.


Assuming the whole contribution is above your SRCOP, a 100 put into AVC means a 40 tax saving, and a 60 cost to you.

You know your gross, so you can calculate 20% or 30% of your gross.
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From what I can tell:

Age 48 - 25% AVC limit
Salary 84k

84k x 25% = 21,000 per annum or €1,750 per month contribution
Assuming all at higher rate of tax, monthly cost would be 60% of 1,750 = €1,050.

OP is already saving 3.5k per month, so starting monthly AVC's asap makes sense. Forget about a lump sum AVC for 2024, pay it off the investment mortgage.

I'm not sure if rental income increases your "salary" for AVC calculations - maybe someone else knows?
 
CharlieMac said:
And you seem to think this is a good idea if I plan to keep the rental?
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No, personally I think it's a terrible idea to keep it. It's barely profitable, its a huge amount of risk, its a major cashflow drain on you and you are basing an important financial decision on 20years of irrelevant emotional factors.

What I was trying to highlight earlier were your options for keeping/selling and that your overall financial position is not that bad.

CharlieMac said:
But then I think that can't be a good idea to waste four more years of not getting on with maxing out my AVCs? Surely that would be worth more to me in the long run?
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Yes that's what I said in my previous post.
1. Pay off your PPR mortgage first and in full. It is better for cashflow and is actually more expensive than the rental mortgage.
2. Set up your regular AVC asap and then make the 2024 lump sum. This will probably be January or February so you can claim the tax back immediately.

Doing both of these steps will use about €70k of your savings.

3. With the remaining €80k of savings, you should clear about €50k of the rental mortgage.

With all 3 steps above you will have about €1000 more cashflow per month. This gives you breathing room to increase your regular AVCs and make your decision to sell/keep the rental.

conor_mc said:
It seems your current needs are very low, things like health insurance will climb in cost, etc, but it feels like you’re over-provisioning for your retirement.
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This is what I was also alluding to earlier. The OP is planning to have huge retirement resources but to achieve that they are making huge sacrifices now which are probably not sustainable

CharlieMac said:
I'm the type who needs to see the details, I'm not interested in being blindly told what to do because after all I've been through I don't trust anyone
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To be blunt, there is a lot wrong with this statement. If you are not going to trust anyone else then the detail is something you need to know and own.

On the details, I think there are a lot of things with the rental and it's finances that you don't fully understand and you really should by now.

I am also still very skeptical of your savings figure. If it is true, you are essentially living in poverty now to have a very well funded retirement at 70. It makes no sense.

You need to sit down and properly build out your monthly and yearly living expenses. Knowing this figure helps you understand what your retirement income needs to be.
 
Hi CharlieMac,

I'm not an accountant nor a financial advisor, but here is my 2c:

I think you are actually in a good financial position but are making things unnecessarily complicated for yourself.

I would:

Pay off the mortgage from your 150k savings. That leaves 94k.
Sell the investment property & repay that mortgage. That leaves another 70k.
Keep back 20k as a rainy day fund and put the rest (154k) into a pension (256k gross).

At this stage, you are mortgage free at age 48 and have a pension of 250K plus a defined benefit pension building up.
You don't have any dependents either to worry about. I would continue putting a grand or so into your new pension, but after that I wouldn't "spend as little as possible". I would start treating yourself and living it up a bit.

Firefly.
 
Apologies to previous posters, but they have no idea what they are talking about. On the property side at least, whatever about the pension.

You have €70,000 invested in a property which is earning €19,200 per annum. That is a return of 27%. That is excellent. As far as I can see that simple fact has been missed so far in this thread (apologies if I have missed it).

So a hugely profitable investment. There is negative cashflow, but you can obviously carry that if you're saving €3,000 per month.

Should you pay down the mortgage? You will get an after tax return of 4.65% guaranteed. That's not bad, probably less than you will get on an AVC but with much more certainty.

Two further observations.

  • I wonder about the €320k value of the house. Very little property is worth less today than in 2006, especially in Dublin.

  • A financial advisor does not provide financial advice. They sell financial products. Calling those people Financial Advisors is like calling used car salespeople Motoring Advisors.
 
cremeegg said:
You have €70,000 invested in a property which is earning €19,200 per annum. That is a return of 27%. That is excellent. As far as I can see that simple fact has been missed so far in this thread (apologies if I have missed it).

So a hugely profitable investment. There is negative cashflow, but you can obviously carry that if you're saving €3,000 per month.
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How do you work that out? From the original post surely it's more like €1.6K / €450K = 0.36% gross yield?
CharlieMac said:
I have an investment property...
Bought in 2006 (yes, I was one of those unfortunates).
Bought for €450k, €250k balance remaining, currently worth approx €320k (only exited negative equity around 2021/2022)
The mortgage is €1800/month.
It is let out for €1600/month gross.
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ClubMan said:
How do you work that out? From the original post surely it's more like €1.6K / €450K = 0.36% gross yield?
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The amount he has invested in the property is its value €320,000 less the outstanding loan €250,000 which is €70,000

His return is €1,600 per month which is €19,200 per annum.

A return of €19,200 on an investment of €70,000 is 27%.
 
cremeegg said:
You have €70,000 invested in a property which is earning €19,200 per annum. That is a return of 27%. That is excellent. As far as I can see that simple fact has been missed so far in this thread (apologies if I have missed it).
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It is not a fact and it is a shockingly misguided interpretation of the numbers. There is no logic for dividing gross rent by equity other than to come up with a silly number like 27%.

The fact that falling property prices make this number look better shows how irrelevant it is. A 10% drop in property prices makes your "return" jump to 50%....

The OP has €12.5 in interest, will have management fees, is also using a letting agent (if I'm not mistaken) and probably some other costs. They are doing well if they are left with €3k of profit but it is probably less.

That's a whole lot of risk and cashflow problems for very little reward
 
cremeegg said:
The amount he has invested in the property is its value €320,000 less the outstanding loan €250,000 which is €70,000

His return is €1,600 per month which is €19,200 per annum.

A return of €19,200 on an investment of €70,000 is 27%.
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If you’re going to ignore the debt, surely you should subtract the repayments from the income too? Effectively the bank own that share of the property and their monthly share of the income is the mortgage repayment.

Generally, the calculation for net yield in property is 10x monthly rent/current market price. This allows an ongoing comparison to other investment opportunities.

(10 x 1,600)/320k is 0.05 or 5% net yield. Not great value for the risk involved but not terrible either.
 
conor_mc said:
If you’re going to ignore the debt, surely you should subtract the repayments from the income too? Effectively the bank own that share of the property and their monthly share of the income is the mortgage repayment.
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My apologies, you are absolutely correct.

The return is €19,200 - €12,250 = €6,950 which is 10% (before any other costs, but we have no info on those).

Still an excellent investment although not as good as I had suggested.
 
cremeegg said:
My apologies, you are absolutely correct.

The return is €19,200 - €12,250 = €6,950 which is 10% (before any other costs, but we have no info on those).

Still an excellent investment although not as good as I had suggested.
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Where are you getting the 12,250 from? Is that just the interest component on the mortgage repayment, or is it the interest-relief'ed full repayment. The monthly repayment is €1800.
 
conor_mc said:
Generally, the calculation for net yield in property is 10x monthly rent/current market price. This allows an ongoing comparison to other investment opportunities.

(10 x 1,600)/320k is 0.05 or 5% net yield. Not great value for the risk involved but not terrible either.
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This is a rough rule of thumb, which as you say allows comparison between properties. It has nothing to do with the return the OP is making on his investment.

His investment in the property is €70,000, that is what he would get if he sold.

His return is €6,950, that is his annual profit (before any other exps as noted above).

That is a return of 10%. Which is very good..
 
conor_mc said:
Where are you getting the 12,250 from? Is that just the interest component on the mortgage repayment, or is it the interest-relief'ed full repayment. The monthly repayment is €1800.
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Yes.

The monthly repayment is irrelevant to profit. Its a matter of cashflow.

While cashflow is usually the first thing to look at in a property investment, in this case the OP has shown that he can absorb the cashflow hit.
 
cremeegg said:
Yes.

The monthly repayment is irrelevant to profit. Its a matter of cashflow.

While cashflow is usually the first thing to look at in a property investment, in this case the OP has shown that he can absorb the cashflow hit.
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Would you mind posting the calculations for the €12,250 cost please? I think I can see where you're coming from, but would like to understand it properly. There's a big discrepancy between your Return on Capital Invested (is that the correct term?) of 10% and the net yield of 5%, but I think your approach is more nuanced so I might even end up agreeing with you!
 
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