Hi
@CharlieMac - if you want to get into the detail on calculation methodologies and the scheme / capitalisation factors you can find them in Chapter V of the Revenue Pensions Manual. See page 10:
https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-05.pdf
The capitalisation factor in Jimmy's case was 19.6 because he is an unmarried male with an NRA of 66.
The example on page 9 of Chapter V of the manual covers a lot of the issues you highlight. The "Gratuity" is the lump sum of 1.5X salary.
The calculations assumed you retire at your normal retirement age which is currently 66? Single Scheme members could choose to work until they are 70. How would that change the calculations?
I don't think it would affect the limits in any material way assuming you already had the potential for ten years of service by the time you hit age 66. Chapter 6 of the revenue pensions manual explores further:
https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-06.pdf
I think I remember reading somewhere that there's a weird quirk where if someone has
more than 40 years service in a DB scheme their limits can be higher than 40/60s but someone with actual expertise here would need to advise. I don't think that's relevant in your case in any event.
But is there any upper limit on how much you can save in your AVC fund? Is that the Max Fund Threshold? Are you allowed to have that much in an AVC fund?
The SFT described in 6.2 and the defined benefit pension limit described in 6.3 operate concurrently.
The SFT is the absolute max limit on the value of all pension benefits from all employments anyone can have. If you exceed the SFT there is a huge excess tax.
The defined benefit pension limit in 6.3 is an
additional limit imposed on the size of the pension you can receive from any defined benefit pension scheme you are a member of (in this case, the Single Scheme). This will typically be lower than the SFT.
The maximum amount of money that you can fund in an AVC is your pension shortfall as explored in section 6.3 of the OP. I've made this a bit clearer now.
I read somewhere, I think, that whatever amount your fund reaches in your AVC OVER the max that applies to you in your table there, that amount isn't forfeited. For a start you could fund your lump sum up to 200k and the rest you would just have to take it as taxable cash or put it in an ARF? That sounds right to you?
The revenue limit on the lump sum that you can have as a Single Scheme member is 1.5x your annual salary. If this is greater than €200,000 you will pay a 20% tax on the excess. Over a long career there'll be a large gap between the lump sum you receive from the single scheme and the revenue max because you accrue lump sum from the Single Scheme on a career average basis. You'll also have a big gap to fill if you're a late entrant. You can use your AVC to top up your lump sum.
I've never seen a definitive answer here about what happens if you fund your AVC over the defined benefit pension limit discussed in section 6.3. I think I might have read that revenue will effectively disgorge you of the tax relief benefit. Other threads suggest that the benefits you receive under the main scheme may be reduced to compensate.
I am a member of the "Ram as much money in your AVC as you can" camp, subject to revenue limits and providing it makes sense for you to invest long term (per section 4). Pensions are the best long-term investment you can make in Ireland besides potentially purchasing your PPR. Your PPR is not an investment as such but it saves you money you otherwise would have been expending on rent.