Notional Service Scheme-a few questions

toby2111

Registered User
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Read a few negative things here about Cornmarket and AVC's(I'm a primary teacher) so I rang DES and asked for a quote with regards purchasing notional service.I'll be 36 later this month and will be 2 years 65 days short on my 60th birthday.So they did all the figures and said "the estimated cost to purchase shortfall per fortnight=€41.82."
Couple of questions-
-says on form that tax relief is allowed at 20% of remuneration but is relief on AVC's not 41%??..why the difference?
-with the possibility of current gov extending retirement age,would this scheme be a waste of my time?
-also gov will probably slash tax relief so should I wait til after budget?
-why are so many people favouring notional service purchase as opposed to AVC's??What are the benefits of NSP?
Sorry about all the questions but I get a bit confused when it comes to these financial decisions!!
 
-says on form that tax relief is allowed at 20% of remuneration but is relief on AVC's not 41%??..why the difference?

They are saying that the maximum amount of annual salary eligible for tax relief that a person aged between 30 and 39 years can invest in an AVC is 20% - see here.

-with the possibility of current gov extending retirement age,would this scheme be a waste of my time?

Hard to be sure, but I reckon that if you're 2 years short of full pensionable service in the current arrangements, then you're likely to be 2 years short in whatever scheme is introduced in the future.

-also gov will probably slash tax relief so should I wait til after budget?

That may well affect an AVC purchase but it's unlikely to affect purchase of Notional Service. Especially if you arrange it before end-2010.

-why are so many people favouring notional service purchase as opposed to AVC's??What are the benefits of NSP?

Do a search of this site and you'll find the answer to that one! If you simply wish to buy 2 added years' service then the purchase of NS is a far better option. (no fees, no brokers commission, no market fluctuations, no risk!)
 
Thanks Shirazman,I understand the tax relief now!
-It seems that the majority of advice would be to go with Notional Service.If I had to retire early(pre 60) for whatever reason,would I lose all benefit from NSP?Or would they take into account that I had "bought back" some service and base my pension on that?
 
It seems that the majority of advice would be to go with Notional Service.

Yes, it best suits your needs.


If I had to retire early(pre 60) for whatever reason,would I lose all benefit from NSP? Or would they take into account that I had "bought back" some service and base my pension on that?

You would be credited service proportionately with the amount of NS that you had purchased.
 
If I had to retire early(pre 60) for whatever reason,would I lose all benefit from NSP? Or would they take into account that I had "bought back" some service and base my pension on that?

You would be credited service proportionately with the amount of NS that you had purchased.


No they would provide an actuarial reduction to an NSP'S bought if you retire before your NRA . Also if they cut tax relief it will effect AVC'S and NSP'S equally.
 
Do a search of this site and you'll find the answer to that one! If you simply wish to buy 2 added years' service then the purchase of NS is a far better option. (no fees, no brokers commission, no market fluctuations, no risk!)
While I'm no fan of high-commission AVCs, I'm not so sure about the 'no risk' claim. There is a risk that the Govt won't be around to pay out your pension.
 
If I can suggest, an objective comparison of PNS v's AVC's, depending on what a particular individual wants from their retirement planning & their circumstances might be best advice for the individual? Everything has it's +'s & -'s, including both AVC's & PNS !!
 
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