Tax free lump sum and deductions.

[acequion]

I have already posted a question about this but since I've got no replies it's very possible that I did not make myself clear.

I recently received a service record from my employer, Department of Education as I want to retire. The record states my estimated gross yearly pension, plus my lump sum. As I am 5 months short of full service, there is a shortfall of €1.000 for the lump sum which I'm aware I can take tax free from my AVC.

However, here is my confusion The service record also lists monies owed for things like PCW buy back and strike days which comes to about €8.000 in total. I have been told to use my AVC to clear this debt and leave the lump sum intact. Can I just withdraw this €8.000 from my AVC fund or is there a tax liability on the withdrawl? Nobody seems to be able to answer that question. My AVC is with Zurich so I rang my advisor today and he doesn't know and Pensions don't rely to queries. Would it not be simpler to deduct this from the lump sum? Any idea, anyone? Thanks a lot.

 

[DingDing]

Every case is different. In my case I had a retirement fund from a previous employment and I withdrew 25% of the value tax free and I paid tax USC etc on the remaining fund value.

You can have a tax free lump sum of 200K and money above this is at 20%. So in my case the tax free value and my lump sum are added and anything above 200K is taxed at 20%, which is still better than paying top rate tax and USC.

This is just my impression from reading various posts here and circulars.

I don't think it is as simple as withdrawing money from one pot tax free to make up a tax free gap elsewhere. If this was the case I would be delighted and I am following your post with interest.

In my case I put the money into a solar system and I have a plug in hybrid car and this lets me power my house and drive free for 5-6 months of the year. This saves me paying out over the 5-6 months, possibly 1,000 euro in fuel and probably another 600 in electricity. As a top rate tax payer and with PRSI, I would probably have to earn well over 3K gross to meet these costs otherwise and it is great for the environment.

I heat the waterm and charge the car at night for about 13cent and I export the generated surplus for about 21cent. The difference covers the standing charge most days. So an investment of 16 K over the year is probably worth 5K gross salary when the saving for the remaining months are included, if I was to fund the fuel and electricity saved from my after tax pay.