what are implications of possible oversubscribed avc

[Alan Smithee]

i am 32 and will be due to retire at 62 (scary even thinking about it!) having completed 40 years service so will have accumulated full HSE pension entitlements

salary at present 61000

i also pay in 205 euro per fortnight into an avc with new ireland for the last 2 years.

so basically want to know will i be oversubscribed ? and what is the possible tax implications of this?

i have spoken to the rep who sold me the plan and they werent exactly brimming with knowledge which worries me. thanks in advance.

 

[oysterman]

Here follow a few thoughts on your query regarding the likelihood of overprovision:

·[FONT=&quot] [/FONT]50% pension + 150% lump sum involves the commutation of 16.67% pension for the lump sum (versus the Revenue 66.67% maximum pension). Revenue accept that 16.67% is too high.
·[FONT=&quot] [/FONT]Public service pensions pay a surviving spouse only 50% of the original pension. Revenue allow 100%.
·[FONT=&quot] [/FONT]Allowances and promotions gained in the last 3 years of service will not be fully pensionable.
·[FONT=&quot] [/FONT]You may have other non-pensionable income.
·[FONT=&quot] [/FONT]Revenue in fact permit 66.67% PLUS the OACP. The OACP is integrated into the pensions of post-1994 hired public servants and is not payable to those hired before that date. All can fund the value of the OACP themselves.
·[FONT=&quot] [/FONT]If you work past your normal retirement age and for more than 40 years you may be entitled to fund an addition to your tax free lump sum of 3/80 x the years in excess of 40 worked.


For what it's worth, I am convinced that the legislative framework for pensions will be unrecognisable by the time you retire. The government is making yet another policy announcement at some stage this week regarding retirement age but there'll be another policy change coming along after that one if you just wait.


Net, keep saving now for your pension. Don't worry overly about what the law is today - it'll change. But you're unlikely ever to regret in the future putting (affordable) money away in the past.

 

[Dave Vanian]

Here follow a few thoughts on your query regarding the likelihood of overprovision:

It's all Greek to me.

The government is making yet another policy announcement at some stage this week...

There's a press conference arranged for 2.30 on Wednesday in Merrion Street with Mary Hanafin & Brian Cowen on the subject of pensions. This will presumably include the proposal to move the retirement age.

 

[Alan Smithee]

thanks for the reply oysterman. i will continue to pay into the avc at the current level while i can afford it but will probably have to rethink current levels if they lower the tax relief from its present rate in the near future. but its better to spread my options given the uncertainty not just in the market but in the governments ability to honour the present defined benefit scheme.

as dave posted it will be very interesting to see what changes will be made on wednesday and whether any of us can retire at all let alone 65, 68 or ever 70!!