DB Pension - is it possible to increase contributions

[kitty81]

Excuse my total lack of knowledge on pensions. It has become my latest project to try and understand.

I am in a DB pension scheme for 20 years but half of these years I have worked part-time so I am exploring ways of increasing my overall final pension.

I have 21 years left to retire at age 60 and other than AVC (which again, I am not overly familiar with yet) can I opt to increase my contribution every month and have it deducted from salary. I think I would find that easier than paying a lump sum each year

Any advice appreciated !

 

[Dave Vanian]

Depending on what scheme you're in, you may be allowed to buy additional years in the scheme. This gives you certainty that you know what you're getting for your money, as you can easily calculate what extra lump sum and pension you get for an extra year's service. The risk is that the DB scheme might not be able to pay you the promised pension when you retire. This depends on the scheme.

AVCs are putting money into a fund which can be used to boost either your lump sum or your pension or both when you retire.

Buying back years or AVCs qualify for tax relief up to age-related limits. Usually both can be done either once a year or monthly.

 

[Homer]

I’m not aware of any private sector pension schemes that allow you to purchase added years. It may have been possible in some such schemes many years ago, but I’d be astonished if there are any providing that option nowadays. If you are working in the Public Sector, then your HR department should be able to outline whatever options are available to you in this regard.

Assuming you’re not able to purchase added years, then you could pay AVCs to increase your benefits. These AVCs would be invested on a Defined Contribution basis i.e. the benefit you would receive would depend on how much you contribute and what rate of investment return is obtained on these contributions.

While AVCs can be paid on a lump sum basis, it’s more usual to pay them by monthly (or weekly, fortnightly) deduction from your pay. You will get income tax relief at source, but pension contributions no longer qualify for relief from PRSI or USC. Again, your employer’s HR department shoukd be able to provide you with details of the options available in this regard.