Starting pension if leaving company - tax benefit?

[jrewing]

I will probably change jobs within the next 6 months, and would like advice on beginning paying into a Pension scheme with my current employer.

If I change jobs, one of the options (apart from transferring to the new Employer's scheme), is to take a refund of the value of my contributions, less 20% tax.

In the knowledge that I probably will leave the scheme, is it legal to use this to get tax relief on a portion of my salary for 2007 ? e.g. I could pay 20% of income into the Pension (20% made up of 6% standard + 14% AVC), and take a refund of it all in 6 months time, with a significant tax saving on that money (20% vs. 41%+PRSI) ? Would I be liable for any other tax on this ?

I am not planning this for tax avoidance, just want to be clear on my options.

 

[Guest126]

Yea it would work fine - remember that there may be fund management charges (and other charges) applied by your pension provider, you would also be subject to investment risk over the six month period (although you may be able to opt for a cash fund)...there may also be a time delay between you leaving the employer and said employer arranging for your refund BUT in theory your idea makes sense.

 

[Cameo]

I did this a little while ago when moving jobs

I made an AVC - gross of tax - I made out a a cheque to the pension fund

I then put in a claim to Revenue in respect of relief due on AVC payments. Received after 6 - 8 weeks.

I later received AVC paid less 20% tax because I left the company and by default the pension fund - I invested 100% in a cash fund and the charges were low. 0.3% or so.

You can also claim PRSI (or some component of) - I put a claim into Sarsfield House in Limerick and got something back from them.

I believe you can backdate up to one tax year for purposes of getting relief on AVC contribution ? I did not do this - don't remember why.

 

[Azriel]

My understanding is that pension arrangements are approved by Revenue for the provision of "relevant benefits", and that a refund is not a relevant benefit. In extremis, Revenue approval could be jeopardised by such courses of action.

The Trustees may act to limit your scope to take a refund where the situation is being abused.