Should I buy back service shortfall with my lump sum or my AVC?

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acequion

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On my service record, which I recently received from my employer Department of Education as I'm a post primary teacher, I can purchase back a fair bit of service under the PCW. The total cost of this comes to about 9K. The service record assumes that I'll use my lump sum to purchase this. However, today I had a consultation with a financial advisor who advised me to take the 9K from my AVC. I don't fully understand why but this financial advisor is a bit biased against AVCs. My AVC is with Zurich.

To clarify. I'm retiring this year at pretty much full 40 years service [thanks to notional service] and my lump sum is about €110 K. I have a very small AVC fund of about €35K which will go straight into an ARF to give me a little more income on retirement.

So is it a good idea to take the 9K from this small fund or should I take it from the lump sum? I'm not at all clear on the tax implications. My pension will not be big and even drawing down an ARF, I should still be under the annual 40K and hence in the lower tax bracket. I would really appreciate other opinions/perspectives? Thanks a lot.
 
Can I just take 9K from my AVC fund before it matures? Is it not simpler to just deduct this amont from the lump sum? Any advice much appreciated.
 
If you decide to take the 9k from your tax free lump sum, I think you can ask for a declaration from the Dept, that you used 9k to purchase pension benefits. You can then send this statement to your tax office and claim back the tax from the revenue. I know it sounds strange, because the you are making a payment from a tax free lump sum, but its still a pension payment. It qualifies for tax relief. So you can offset, some of the cost, by claiming. If , in your last year of employment, you paid 40% on any of your income, you could claim this back at the top rate.
 
Thanks for that. When you say last year of employment, I may now job share for a few months before I finally retire and if so I'll be paying tax at the lower rate. Does the fact that I'll be at the lower rate [even though it will only be months] mean I can only claim the tax back at 20%?
 
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