Starting PRSAs at 52

A

AllanahR

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Greetings,

I'm 52. My basic monthly pay is 3,265 monthly, 2564 after deductions. I am a public servant so will have a defined benefit pension on retirement of 16,500 before tax if I stay till 65.
My question is about PRSAs. I was advised it wouldn't be worth my while given my age and it would be better to put money aside in a savings account.
However, you do get tax relief on PRSAs, so I'm wondering if this is the best advice.

Any tips?
 
As a PS, in a PS pension scheme, you have two options to enhance your pension.

(1) NSP

(2) Start an AVC.

There is the same tax relief in both cases.

Whether it makes sense for you to do notional service purchase or start an AVC depends on lots of factors.
 
Protocol said:
As a PS, in a PS pension scheme, you have two options to enhance your pension.

(1) NSP

(2) Start an AVC.

There is the same tax relief in both cases.

Whether it makes sense for you to do notional service purchase or start an AVC depends on lots of factors.
Click to expand...
Thank-you for this. One more question. The bit I don't understand is how the tax relief works. If I can get 20% tax relief on a PRSA, then if I put 100 in monthly, does this mean I get 20 back in tax relief, in which case I'm saving 100 but it's only costing me 80? I know there are fees for management of PRSA and you pay tax on pension when you draw it down. I am currently in the 20% tax band. if I'm already at the 20% limit before tipping into a higher tax band, does this make a difference.

Thank-you for taking time to read and advise:)
 
Depending on your specific circumstances, it's possible to build up an AVC fund of just the right size that it can be used solely to supplement your tax-free lump sum at retirement. So if you've got 20% tax relief on the contributions, the fund growth has exceeded the product charges (or at the very least kept up with them) then you pay 80% of what you put in and take out 100% tax-free. That's tax-efficient. But as @Protocol says, there are a lot of factors to be taken into consideration.
 
You put 100 per month into AVC.

You tell the Revenue.

They adjust your tax credits.

Your income tax bill falls by 20.

Your net pay rises.
 
AllanahR said:
. I was advised it wouldn't be worth my while given my age and it would be better to put money aside in a savings account.
Click to expand...
This person could be a good source of advice. Whatever they say to do, you do the opposite and you'll be on the pig's back.
 
If you exceed the 20% tax band it would be very beneficial for you to invest the amount of extra earnings into your AVCs. Every 100 euro in, then gets you 40 euro back.

At the end of each tax year you could invest the exact amount of income subject to 40% tax.
 
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