Yet another AVC question

[zsuzsa]

Hi there. I work for the HSE usually, I have an AVC, it comes from my HSE payslip and even though I have a vague idea how they work I am not very financially minded!
Any how, I worked for a private hospital for a few months and I have just made a lump sum contribution to my AVC to cover that.
I spoke with the advisor and he said. Oh - and don't forget you can claim back 900 euro tax on that next year.
Now.
I put 240 per month into a state savings account for the children allowance. There is probably 6 or 7 thousand in it.
If I instead move that money to my AVC, do I then get 40% of that back from my tax next year too? It seems a bit simple and obvious so I am sure I am wrong!

 

[Ciru75]

There's a maximum amount of contributions that you can get tax relief on in a year (it's a percentage of your gross income depending on your age) but other than that, yes you can get 40% tax relief (assuming that you're paying tax at the higher rate) on any money that you pay as an AVC.

 

[LDFerguson]

Remember that by putting the money into a State Savings scheme, you have access to it all as a lump sum whenever you want it. By putting it into an AVC you only have access to it when you are retiring and drawing your benefits from the HSE superannuation scheme. You may or may not be able to withdraw all your AVC fund in lump sum form and you pay end up paying tax on some of it when you retire. So comparing a State Savings scheme with an AVC is not really comparing like with like. Both can work well ... for the different purposes for which they were intended.

I have an AVC, it comes from my HSE payslip and even though I have a vague idea how they work I am not very financially minded!

If you're paying into an AVC every payday, then you should familiarise yourself with what you're paying into and why. In my opinion, that's part of the job of the advisor. Ask him to explain to you what the benefit to you is in paying into this, what you might reasonably be expected to get from it when you retire and what you are being charged for it. Make sure that the advisor gives you the answer in a way that you can understand and not some industry jargon. Again, in my opinion that's part of the job of the advisor - to explain the jargon to you in a way that actually informs you. Ask also for details on what your money is actually being invested in and for your advisor to give you an opinion as to whether or not this fund is suitable for you personally. I would guess that the advisor (or at least his employer) is getting paid something every time you make a contribution or perhaps a percentage of your overall fund, or both. So this should be part of the service.

Regards,

Liam
www.ferga.com