4. Does it make sense for me to invest more in my pension as a Single Scheme Member?
In 99% of cases the pension you will receive from the Single Scheme when you retire will be
much smaller than the maximum pension revenue might have allowed you to have under Irish tax rules (unless you are a highly paid public servant e.g. 150K+ salary for most of your career).
You can invest more money in your pension to have a higher income in retirement or as a form of long-term investment.
Generally speaking, pensions are a great way to grow your wealth in Ireland compared to other long-term investment options because they grow without being taxed until you start to draw them down (allowing them to compound more effectively), you get tax relief on the contributions you make (this is like a loan from revenue you can earn money on) and you may pay less tax in retirement than you will when you’re working.
However, you need to consider whether it makes sense to invest more in your pension in light of your broader financial circumstances and objectives.
Generally speaking, in Ireland, your financial priorities should be to:
- Eliminate any costly debt (2.5%+);
- Purchase a home / save for a deposit, so that you are no longer paying exorbitant costs to rent property;
- Have enough money to meet all your short-term and most of your medium-term financial needs, including utilities, family expenses and education costs, childcare, etc…
You may also wish to:
- Invest in your education, so that you can increase your prospects of getting a better job and attaining a higher salary, promotions etc.
- Travel if you’re a young person, before you settle down and find a partner etc…
It generally only make sense to consider long-term “investments” in Ireland, like investing in your pension, when factors like those described above are
not present
It also generally only makes sense to invest more in your pension when you’re paying income tax at the 40% income tax rate rather than the 20% rate, unless you have a very long investment horizon (20+ years) or you don’t expect to ever pay tax at the 40% rate when you retire.
If you’ve considered all of the above and
still think it’s a good idea to do some long-term investing, you’ll also want to consider other possible options.
For example, if you own a home, it may make sense to take the money you might have invested in a pension to pay off your mortgage early instead. See related discussed thread
https://www.askaboutmoney.com/threa...ibute-to-pension-or-do-something-else.221401/ . You could also think about making your house more energy efficient.
Generally speaking, in Ireland it doesn’t make sense to invest in ETFs, life-insurance investment products etc… until you have maxed out your pension contributions and your mortgage has been paid off. Do not invest in Crypto, Gold, individual stocks, individual bonds etc… unless you love losing money and filing tax returns for your trouble.
If you decide to invest more in your pension you won’t be able to access the money till you retire. You should think really carefully about whether you might need that money for something else in the meantime.
If investing in your pension does make sense for you then one way you can do that is to set up an AVC or an AVC-PRSA (Please note the Single Scheme Purchase / Transfer Facility is discussed in section 9 below).
5. Additional Voluntary Contributions (AVCs)
Setting up an AVC is a way to invest more money in your pension
When you set up an AVC you make payments to a
separate pension pot you can access when (and only when) you retire. This pension pot is invested in various funds that you choose and the money invested grows over time. You get tax relief on contributions you make to your AVC just like your normal pension contributions to the Single Scheme.
If you take a sensible investment approach over long periods of time it’s very likely you’ll end up with a lot more money than what you put in to your AVC. See the Callan Periodic Table of Investment Returns:
https://www.bogleheads.org/wiki/Callan_periodic_table_of_investment_returns But,
your capital is ultimately at risk. If this makes you uncomfortable you can read more about investing in general and try to learn about the differences between risks, volatility, different kinds of funds and asset classes (I quite like the Four Pillars of Investing by William Bernstein).
Not all AVCs are equal and you can source them from different providers and they have different advantages and disadvantages. The three main factors that will typically make one AVC better than another are: (i) Convenience; (ii) Fees and (iii) Fund Choice.
As a public servant you have two main options when deciding to make an AVC: the Cornmarket Route or with another provider / broker.
5.1 The Cornmarket Route
The public sector unions have negotiated deals on AVCs with a pension broker called “Cornmarket” (owned by Irish Life). You don’t need to be a union member to get these rates – you only need to be an employee of a public sector body signed up to the Forsa AVC / Equivalent Union AVC Pension Scheme (More on this below).
The two main advantages of going with Cornmarket for your AVC are:
- Salary Deduction at Source. When you set up an AVC with Cornmarket deductions come straight out of your payslip. All tax issues are addressed without any further thinking on your part. You don’t need to worry about admin, filing tax returns with revenue etc….. This convenience has a lot of value and means you don’t really have to think too much about your AVC or remember to do anything.
- Fees. Cornmarket has a favourable discount fee structure in place for certain public sector AVC schemes which means that you may pay significantly less fees compared to other providers. These Schemes are: AHCPS, ASTI, DCU, Fórsa (Civil Service), INTO, Local Authority & State Agency, Nurses and Other Health Professionals, SOLAS, TUI and UCD. Every euro you contribute each week / fortnight in these schemes will go into the pot (this is called 100% allocation). "One off" contributions will be subject to a 4% fee. On these schemes Cornmarket will also apply the following discount on the Annual Management Charges (AMC) for your pension pot each year:
- Standard AMC on first €40,000
- -0.25% AMC on the next €100,000
- A further -0.25% AMC on the remainder of the pot.
This means if you have a AVC fund worth €300,000 and a fund’s standard AMC is 0.65% everything between €40,000 to €100,000 will have a 0.4% AMC and everything over €140,000 will have a 0.15% AMC. This is about as a good as it gets on personal pension contract fees in Ireland and will add up to huge savings over long investment horizons for pots that are more than modest (see Bogleheads post here for effects of fees on pension funds:
https://www.bogleheads.org/wiki/How_much_do_you_lose_to_annual_fees_after_many_years?). For reference, average rates for PRSA / PRSA AVCs in the Irish market for AVC-PRSAs hover around 1%.
So Cornmarket is (i) convenient and (ii) may have significantly smaller fees than other providers.
What’s the catch?
Choice of Funds from Cornmarket
Cornmarket has default funds and strategies it tries to put public servants on when you take advice from them. These include the “cautious”, “balanced” and “adventurous” funds. The returns on these funds are pretty terrible compared to what you could have gotten by investing in something else.
You can invest in other Irish Life Funds when you set up an AVC through Cornmarket’s self-directed option by filling out the form on their website and posting it to them / making an online application (see here:
https://www.cornmarket.ie/avc/). In the fund selection part of the form you can write in the funds you want to invest in and the % allocation and select what % of your salary you want to pay in the AVC each month. There’s a €100 fee to do this which comes out of your payslip over time. You also need to fill in a salary deduction form.
The trouble is that Cornmarket don’t publicise information about the other Irish Life funds that you can invest in very well and the fees you’ll be charged for each fund vary depending on the Public Sector AVC scheme you belong to. There’s no way to get this information without directly getting in touch with Cornmarket.
For example: the World Equity Index Fund is available on both the Forsa AVC Scheme and the ACHPS AVC Scheme. On the Forsa Scheme it has a standard AMC of 1% and on the AHCPS scheme it has a standard AMC of 0.65%.
Some of the funds that are currently available to invest in through the
Forsa AVC Scheme as of Jan 2025 are:
- Empower Cash Fund (1% AMC)
- Exempt European Equity Indexed Fund (1% AMC)
- Exempt North American Equity Fund (1% AMC)
- Global Cash Fund (1% AMC)
- Indexed Commodities Fund Cb (1.55% AMC)
- Indexed Developed World Equities (1% AMC)
- Indexed Emerging Markets Equity Fund (0.65% AMC)
- Indexed Ethical Global Equity (0.75% AMC)
- Indexed Fixed Interest Fund (1% AMC)
- Indexed Global Equity Fund Series S (1% AMC)
- Indexed World Equity Fund (1% AMC)
- Socially Responsible Global Equities (1% AMC)
So you can see that the AMC on funds on the Forsa Scheme varies enough to potentially influence the decision you would make on how to allocate to them. The issue of how to allocate between different funds is touched on below in Section 7.
The AHCPS Scheme and other union schemes may not provide access to the funds listed above and may charge different standard fee rates for the same funds (they certainly do for the World Equity Indexed Fund).
So if you are minded to set up a self-directed AVC with Cornmarket before you do so you should shoot them an email (
lifecustomerservice@cornmarket.ie;
pubsec@irishlife.ie) stating the public service body you belong to asking:
- What AVC Schemes are available to employees in your body? (Remember you don’t have to be a member of the union)
- What Funds are available to invest in on those schemes?
- What are the AMCs of the funds on the schemes available?
- To provide up to date fact sheets for any of the funds you might be interested in investing in. Irish Life’s general fact sheets can be found on its fund centre on its website (https://www.irishlife.ie/investments/fund-prices-and-performance-investments) but they might not correspond to the particular fund that’s available for you to invest in your particular scheme.
This is the only way to know all of your options for sure. The self-directed / no advice form that Cornmarket uses doesn’t provide the right / full names of all of the funds you can invest in or their fees.
5.2 Going through another supplier / broker
Cornmarket will expectedly be the best option for most public servants if they are on the tiered AMC scheme and they can get access to good index funds at an AMC lower than 1% or so. The convenience of salary deduction will also weight into the equation.
However, you’re not bound to use Cornmarket and you can approach other providers to set up an AVC-PRSA.
For example, Execution-only.ie has some good deals on Royal London and Standard Life PRSA-AVCs with AMCs that start from 0.6% after a certain monthly contribution size and the potential for further rebates / discounts with Royal London.
Other suppliers / brokers could be very good for a public servant in some circumstances, such as:
(i) If you don’t like the Irish Life funds available on your scheme for whatever reasons;
(ii) The planned size of your AVC means you can’t properly avail of the Cornmarket discounts rates or
(iii) If the fees on funds available to you on your particular Cornmarket scheme aren’t great.
Administratively it is more burdensome to go this route because you have to either (i) claim tax relief at the end of the year (which will impact your cash flow) or (ii) fiddle around with your tax credits on revenue’s MyAccount system to simulate salary deductions.
An AVC PRSA can also be transferred to another provider more easily than a standard AVC (For a standard AVC you'd need to pay an actuary for a Certificate of Benefits Comparison to move to a PRSA AVC).
6. AVC Funding Limits
The amount of money that you can invest in an AVC is limited by certain caps imposed by revenue / legislation. Bad things can / will happen to you if you exceed them.
For Single Scheme members there are three main caps to be aware of:
- The yearly age-related limit for tax relief;
- The standard fund threshold;
- The defined benefit salary limit.
Generally speaking there’s a large scope to invest in AVCs as a Single Scheme Member. You don’t really have to worry about caps 2 / 3 above unless you expect your AVC to be worth €500,000+ in today’s money or unless you have a very large pension from a former employer. If you follow some of the strategies in this thread over a 15/20+ year period you could end up with a very large AVC so best to be aware if that’s your investment time horizon and maybe check in if your AVC is performing well.
6.1 The Yearly Funding Limit
Revenue limits the amount of tax relief you can claim on pension contributions each year based on your age. The limits are set out below. The limits include your contributions to the Single Scheme on your payslip (typically 5-6% gross salary per annum) but do not include additional superannuation contribution (ASC)..
| Age | % limit of Gross Salary |
| Under 30 | 15% |
| 30-39 | 20% |
| 40-49 | 25% |
| 50-54 | 30% |
| 55-59 | 35% |
| 60 or over | 40% |
So let’s say you’re thirty-eight years old and your Single Scheme contribution is 6% of your gross salary. This means you can get tax relief on contributions of 14% of your gross salary each year.
The yearly funding limit is also subject to a Salary Cap of €115,000.
So if you’re the same thirty-eight year old and your salary’s €150,000, you can only claim tax relief on 20% of €115,000.
Please note you can only claim tax relief on the tax you actually pay. Meaning: if you only pay a very small amount of tax at 40% you can only claim tax relief at the 40% rate on that amount.
Poster
@gort_gráinneog has put together a great calculator here you can use to explore your yearly limits and to work out your net pay after contributions:
https://www.askaboutmoney.com/threads/the-single-public-service-pension-scheme.236839/post-1889125
6.2 The Standard Fund Threshold
The Standard Fund Threshold (SFT) is the absolute cap on value of the pension benefits you can have in Ireland. This will be €2.8 million in 2030 and will increase in line with inflation thereafter. This includes the value of your Single Scheme Pension, your AVC and any pensions you have from previous employments.
I touch on calculating the value of your Single Scheme benefits under 6.3 below.
If you’re moustache-twirlingly rich enough that there’s a risk you’ll reach the SFT you should definitely speak to a good independent financial advisor. This might also be something to keep an eye on if you’ve been a senior public servant on a pre-2013 pension scheme for a very long time and for whatever reason you’ve switched to a position on the Single Scheme later in your career.
6.3 The Defined Benefit Salary Limit / Working out your AVC Funding Gap
This is the most complicated one to work out.
When you retire Revenue will allow you to have a pension (including Single Scheme Benefits + AVC) worth 2/3 of your final salary as a
capitalised value, assuming you can complete ten years of service
. A capitalised value just means how much an actuary would say this is worth as a lump sum in the present day. The following table illustrates this for Single Scheme members of different genders, marital statuses and at different salary levels providing you are able to serve
at least 10 FTE years as a scheme member:
| Gross Salary | Female with no spouse or civil partner | Female with spouse or civil partner | Male with no spouse or civil partner | Male with spouse or civil partner |
| 25,000 | 381150 | 414150 | 323400 | 455400 |
| 50,000 | 762300 | 828300 | 646800 | 910800 |
| 75,000 | 1143450 | 1242450 | 970200 | 1366200 |
| 100,000 | 1524600 | 1656600 | 1293600 | 1821600 |
| 125,000 | 1905750 | 2070750 | 1617000 | 2150000+ |
You then need to work out your
Pension Shortfall to find out how much you can invest in your AVC. This is:
[The maximum revenue limits for defined benefit pensions for your salary level - per table above].
minus
[The
capitalised value of the pension benefits you would accumulate under the Single Scheme if you worked from now to age 66 at your current salary level]
plus
[The
capitalised value of the benefits you have accumulated under the Single Scheme to date]
To get a
rough idea of the
capitalised value of the pension benefits you would accumulate under the Single Scheme if you worked from now to age 66 at your current salary level work through the following steps:
(Current Salary / 2) – 14500 = X
X * 0.025 * (Number of years till you reach age 66) * 25 = Capitalised value of referable pension from now to 66
Lump Sum Value = Current Salary * 0.0375 * (Number of years till you reach age 66)
Capitalised Value = Capitalised value of referable Pension still to earn + Lump Sum Value
To get a
rough idea of the value of the benefits you have accumulated under the Single Scheme to date get your latest pension benefit statement received from your employer and multiply the accumulated referable pension by 25 and add the accumulated lump sum to the total.
Example
Let’s say Jimmy just joined the public service, has twenty years to go until he can retire at his normal retirement age (66) and is paid a static 75,000 for the duration of his career:
75,000 / 2 – 14500 = 23000
23000 * 0.025 * 20 * 25 = 287500
75000 * 0.0375 * 20 = 56250
287500+56250 = €343750
Jimmy isn’t married so his pension shortfall is 970200 – 343750 = €626,450. His pension shortfall would increase by about €400,000 if he got married.
In reality Jimmy’s salary would not stay static over the twenty years but would increase significantly with increments, promotions and general public service pay increases. Let’s say Jimmy started getting paid €75,000 a year and ended up getting paid €125,000 at the end of the twenty-year period. Under current rules his maximum pension at that point would be 1,617,000 if he’s single and 2,150,000+ if he’s married.
7. AVC strategies to consider (Read this if TLDR)
Generally speaking, it’s a good idea to invest aggressively in AVCs as a Single Scheme member if you can. This is because investing early means you can make the most out of compound interest and tax relief to grow your wealth over your career. You can always reduce how much you contribute to your AVC later on in your career if it makes sense at the time. As discussed in the above section, the risk of overfunding on the Single Scheme is generally quite low but you should be aware of revenue limits.
Because the funds available to you and their fees vary for different public service schemes / across different providers it's difficult to make specific suggestions on how to allocate your AVC but there are some general principles you could follow to keep things simple (see section 5 on different AVC options).
You should invest in two kinds of funds: Equity Index Funds and Bond Index Funds. Ideally these would be as global as possible to ensure diversification. An index / passive fund is a fund that buys and sells investments based on their value in the market rather than one which has a fund manager that actively tries to beat long-term markets returns.
Irish Life Global Equity Index funds that would fit the bill and which may be available via Cornmarket AVC schemes include:
- Indexed Developed World Equities
- Indexed Ethical Global Equity
- Indexed World Equity Fund
All things being equal, one of the funds above with the lowest fee on your scheme is probably a good shout as the equity portion of your portfolio. The Ethical Global Equity fund will provide slightly less diversification overall because it screens out about 100 companies from the index it tracks involved in some not so great stuff (chemical weapons) etc… but this fund has actually outperformed other Irish Life funds not insignificantly over the past five years. This is mostly because the fund is a bit more heavily weighted towards tech stocks rather than anything intrinsic to the benefits of ESG. You can see a comparison of the performance of the index the ethical global equity fund tracks vs the index the indexed world equity fund tracks here:
https://www.msci.com/documents/10199/255599/msci-world-esg-screened-index-usd-net.pdf
An Emerging Markets Fund (e.g. the indexed emerging markets equity fund) might also be good for a bit of diversification with the above funds if you have a 20+ year investment time horizon but should never be more than 10-20% of your allocation (and probably only included if the fees for it are very good on your plan).
Global Equity Index funds have previously delivered around 10% PA per year over long periods of time before inflation/ fees are taken into account. €10,000 compounding at 10% PA for thirty years becomes €175,000. This would be a quite optimistic scenario and sages have predicted equities will generally deliver less over the next few decades (
https://www.bogleheads.org/wiki/Historical_and_expected_returns).
For your bond fund you ideally want something focusing on bonds of five years or less. From the Irish Life selection of bond funds the only one that seems good in terms of ensuring diversification / growth is the Indexed Fixed Interest Fund. Bond funds deliver less returns than equities overall but act as a nice diversification counterweight if equities take nose dives periodically over long investment horizons as they are prone to do. They’ll also help to preserve the value of your AVC as you get closer to retirement.
As a general rule, you should weight your AVC more towards equities if you have a longer investment horizon and a bit more towards bonds if you have a shorter investment horizon. Allocating portions of your portfolio to cash etc…. may be helpful if you’re close to retirement (e.g. five years) but drawing down your pension etc.. is a bit out of scope of this thread.
Finally, you should generally only be investing in AVCs if you’re getting 40% tax relief on the contributions you make
unless you still have 20+ years to retire or you expect not to be paying a 40% income tax rate in retirement. Also – don’t invest in an AVC if your contributions only receive 20% tax relief and you have a mortgage to pay off.
Examples
Assuming that:
- You have assessed you’re in a position to make long-term investments and investing in your pension is a good long-term investment option compared to the other options you have available
- You are neither a consultant doctor nor some other similarly extremely highly paid public servant;
- You do not already have significant pension benefits from previous employment;
- You don’t have any other financial circumstances or personal situations that would affect you decision to invest
….. here are some examples of how you could approach setting up an AVC based on different scenarios and subject to revenue contribution limits.
Example 1
If you’re a Single Scheme Member with more than twenty years before you plan to retire you could set up an AVC and invest as much as you can afford 100% into an equity index fund.
Once you have ten to fifteen years to retire you could re-evaluate your situation. Depending on your financial circumstances, it may make sense to continue investing in equities or a mix of equities and bonds. You may also want to up or reduce the amount you’re investing depending on the growth of your AVC.
Example 2
If you are a Single Scheme member with 20-10 years to retire you could set up an AVC allocated 80% in a global equity index fund and 20% in an index bond fund. Maybe 70/30 if you’re closer to go to retirement.
You can probably ram as much money into your AVC as you like before you retire (but again watch out for the yearly limits on contributions).
Example 3
If you’re a Single Scheme Member that’s planning on retiring early you should be ramming as much money into your AVC as possible as early as possible. You could invest 70 / 30 in equities / bonds if your investment horizon's 15 years or so.
Example 4
If you're doing a very late AVC (e.g. 5 years out from retirement) look elsewhere about how to maximise your benefits before you retire.