Moneymakeover 35yo, relocating home, do I frontload pension or invest?

A

aindabem

New Member
Messages
4
Hi,

So, in another thread it was suggested I put my situation here for your collective ideas.

I’m moving home to Ireland and starting a public service job in December, I have no public service pension. I am thinking of putting around €70k in savings into an AVC PRSA to ‘front load’ it. I’ll be on about €80k/y and would hope to stay at least 10 years, so would hope to get full tax relief in time. I’m 35, no kids, single.

I’ve otherwise got good savings and a mortgage I’m paying off (300k over 30y at 3.5%). No other loans. No big expenses on the horizon. I’ve an emergency pot of €20k that I hope should cover me for any unexpected life surprises.

I would hope to be able to save €12k/y to max out the upcoming govt invx account.

So, my questions are:
  1. what am I missing?
  2. what would you do?
  3. I’ve been recommended a few AVC PRSA providers (execution only) and would be interested in your experience with them.
  4. I’d also be interested in any financial planner/advisor, unconnected to the PRSA provider, if that also made sense (I previously spoke to someone from Ask Paul and DNG Finance didn’t find either of them very knowledgeable for my situation).
  5. My savings are currently in ETFs which I understand I will need to sell before moving my home to avoid any Irish tax liability, is there anything else I should be aware of here?
I’m not totally new to investing, but until now I’ve just been copying a friend who was in the same situation as me and that worked very well. Now I’m moving home and they’re not, so I need to figure it out for myself

Thank you in advance!
 
For a Money Makeover you really should follow the recommended template.

Key Post - Basic information required for the "Money Makeover" forum

It can be difficult, but please try to use a meaningful title in your thread For example "27 year old with mortgage arrears". You will get a much better and much more coherent answer if you give as much information as possible in your first post. For example, if you give your mortgage rate, it...
www.askaboutmoney.com
 
aindabem said:
I’m moving home to Ireland and starting a public service job in December, I have no public service pension.
Click to expand...

But you will be joining both the State Pension and the Public Service Pension in December?

Are you 100% clear on how both of these work?

Have you read about the occupational pension scheme that you will soon join?


You should fully understand how your occupational pension scheme works, before you think about doing AVCs.
 
aindabem said:
I’m moving home to Ireland and starting a public service job in December, I have no public service pension. I am thinking of putting around €70k in savings into an AVC PRSA to ‘front load’ it.
Click to expand...

My first question is: why are you thinking about doing AVCs?
 
Two things on the "what am I missing" question, leaving the Single Scheme side to Protocol:
1. The €70k won't get relief quickly. Relief on AVCs is capped at an age-related share of your earnings from that job (20% in your 30s, 25% from 40), and Revenue reduces that cap by your own contributions to the main scheme. On €80k that's €16,000 less your Single Scheme contributions (a few thousand a year), so roughly €12k-13k of relief room a year. For 2026 the cap is 20% of your December pay only.
Nothing is lost: Revenue's Pensions Manual (chapter 24, PRSAs) says unrelieved contributions carry forward to later years. But €70k would take about six years to get through, and the money is locked until you retire from the job. Front-loading gets it growing tax-free sooner; feeding it in each year up to the cap gets the same relief at about the same pace while you keep access to the rest (or use it against the 3.5% mortgage). It's a trade-off rather than a no-brainer.
2. Selling the ETFs before you land may not take them out of Irish tax. Irish CGT applies in any tax year you're resident or ordinarily resident, and you only stop being ordinarily resident after three full tax years away. If you left less than three full tax years ago, a sale while you're still abroad can still be taxable here (as well as wherever you live now). If you've been away longer, selling before you become resident does reset your cost base cleanly.
One more on timing: arriving in December you'd normally be non-resident for 2026 on day count, but you can elect to be resident for the year you arrive. CGT looks at the whole tax year, so check how an election would interact with a 2026 sale before making one.
 
AkashR said:
2. Selling the ETFs before you land may not take them out of Irish tax. Irish CGT applies in any tax year you're resident or ordinarily resident, and you only stop being ordinarily resident after three full tax years away.
Click to expand...
Many or most ETFs are not subject to CGT in Ireland but rather exit tax on disposal.

In many cases cross jurisdictional tax issue may need specialist advice.
 
aindabem said:
I’ve otherwise got good savings and a mortgage I’m paying off (300k over 30y at 3.5%).
Click to expand...

The first issue to resolve is the financing of your home.
Is your current home your final home? Is it likely that you will trade up in the near future?
If you are thinking of trading up, then you should probably conserve cash and not make any contributions to your pension. At 35, you have plenty of time to contribute to your pension.

Assuming you are in your final home, or at least the home you plan to live in for the next ten years, then max your pension each year. But don't front load it. Keep life simple.

Next you should use your investments and cash to clear your mortgage. This gives you a guaranteed, risk-free, return of 3.5% net of tax. Nothing else compares.

By investing in an equity fund while having a mortgage, it means that you are effectively, borrowing to invest. You can handle the risk, but why do it?
 
Is your house in Ireland or will you need to sell and buy when you move over? If here then might you ever want to upgrade/up size?

Are you coming from the UK? If so, and you are eligible to continue paying in to that state pension after you move back, then you should do that.

You should check your Irish PRSI contribution record to see what you might be on track to be entitled to by way of the Irish state pension by the time you are eligible for that. You can get that info online with myGovID.

IMO if you think you will keep working until 66 then starting AVCs is less urgent due to your age and if you expect other priorities such as housing and family.

An AVC PRSA fund would give you the option to retire early and that find could be used to buy back service years from your public sector employment before you retire. Most people think it's not good value but you would be buying an inflation linked government backed annuity so there's that.
 
ClubMan is right, thanks for the correction. For Irish or EU-domiciled ETFs it's exit tax, not CGT: 38% this year, 35% from 1 January 2027 if the Finance Bill passes as published, and a loss on one fund can't be set against gains elsewhere.
The residence point still matters, though. The funds rules tax people who are resident or ordinarily resident, so if you left less than three full tax years ago, a sale now could still be caught here as well as where you live.
Two more things if you decide to keep them rather than sell:
1. There's no rebasing when you arrive. The 8-year deemed disposal clock runs from each original purchase date, so anything bought in 2019 hits its first 8-year date in 2027, and the gain is measured from what you paid, not the value when you land.
2. Keep a record of every purchase date and cost now, while your current broker's statements are easy to get. You'll need them for each 8-year date and for any sale.
Agree with Brendan and ClubMan that a cross-border adviser before you move is money well spent, especially on the sell-before-or-after question.
 
I would suggest you get well settled in your new role (including past probation 9 months+) before any frontloading of AVCs for future years - what if youdon't like it and want to leave? A lot can change even in a job / area you like - a new manager where there is a personality clash etc.

It is a lot to be comitting yourself to staying maybe 5 years in a role for a bit of extra possible (not guaranteed) growth in the markets imo.
Personally I would just do the yearly tax relief max
 
You must log in or register to reply here.
Back
Top