Paying a bonus into my pension as an AVC

L

Lean&Green

New Member
Messages
3
So I receive a bonus payment in March, that I want to pay into my pension as an AVC. I want to pay it straight into my pension to avoid the temptation to spend any of it. I'm in the age bracket (40-49) so I should be able to contribute 25% of my salary into my pension each year. Problem is that I am being told by the pension people that I can only pay in 25% of my salary for the first 3 months of the year, and not 25% of my annual salary. Is what I am being told correct? Do I have to wait until the end of the year to make an AVC based on my full salary?
 
They're telling you that you can only (for the moment) pay in 25% of your monthly salary, not 25% of your earnings? They should be able to facilitate a higher amount with this month pay but if they dont, you should be able to make an increased pension payment in any future month to keep you at 25% of total earnings during 2024 (appreciate you want it to be instantaneous with receipt of the bonus).
 
It's a payroll issue. I'm assuming that the bonus would bring you over 25% of your first three months' salary. So if the AVC is processed through payroll, the payroll software won't give you tax relief on all of it because the payroll system has no way of knowing for certain that you will still be there in month four onwards.

A possible solution would be to make the AVC from your own bank account after you receive the bonus - not deducted from salary. You can do this through the existing pension scheme if it will accept it or using an AVC PRSA of your own choice. If you contributed less than your 25% last year, you can claim back the tax relief on the full amount against 2023 tax year.

Regards,

Liam
www.FergA.com
 
As stated by Liam you could open an AVC PRSA and add money to this at a time of your choosing. Your employer will not have any knowledge of these payments and that you can afford to make extra AVCs. This could be to your advantage of you are seeking a pay increase.
 
Lean&Green said:
I am being told by the pension people that I can only pay in 25% of my salary for the first 3 months of the year, and not 25% of my annual salary. Is what I am being told correct? Do I have to wait until the end of the year to make an AVC based on my full
Click to expand...
It will be 25% of total income in first three months that includes your bonus if its paid in March. Obviously you have to keep in mind overall ceiling in one year is 25% of €115,000.
 
I guess you could contribute the money directly into the fund and then get Revenue to code the contribution into your Tax Credit Cert for the remainder of the year. It depends what the numbers look like basically.
 
even if you end up paying tax on some of it now, presumably the payroll system will fix that over the rest of the year, or you can just claim back the overpaid tax in January.
 
If you claim AVC tax relief on Revenue it ask you for your expected annual income for 2024. The full year, not the months so far. So you can make an AVC of 25% of the full year amount.
 
Last edited:
You must log in or register to reply here.
Back
Top