Another Teacher on AVCs v NSP

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cord

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Searched for other postings but nothing really answered my questions, so
here goes
21 years down with a VEC and I hope to "jump ship" after 33 years (2 years notional for a four year degree). I have been paying in to AVC's for the last few years through Marsh. I now see that the NSP scheme might be of interest. My questions are… can I do both AVC's and NSP's? If I were to take the NSP option and freeze the AVC's (if that's possible), in so doing take the actuarial reductions when I take early retirement, if still alive, would that not be a safer bet? OR am I talking rubbish??

Thanks for any replies
 
Re: Another Teacher on AVC's v NSP

Firstly I'm no expert,but went through this in hugh detail few months ago.
My understanding is you can have NSP and AVC provided your entire pension contribution stays under your tax relief threshold(age based). If you want to retire prior to 60 you cant get a quote on NSP from salary dept. You can fudge and say your retiring at 60... problem is you wil lstill be short the 40 yrs.
I'm a 65 retirement date and since i was deemed as having full 40 at 65 I wasn't allowed do NSP so AVC's for me.
From my research a big shock to me was that NSP amount you have payed in will be lost if you die prior to retirement while an AVC or PRSA will be payed on death.
 
Re: Another Teacher on AVC's v NSP

BillyM said:
From my research a big shock to me was that NSP amount you have payed in will be lost if you die prior to retirement while an AVC or PRSA will be payed on death.
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That's a shock to me too. I always assumed that whatever pension contributions you made (and NSP too) would be paid on death -at whatever age- to spouse/children.
 
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Re: Another Teacher on AVC's v NSP

Hello and thanks for the reply. When it comes to the 60/65 retirement, I am a bit lost. I'm pre 2004 so I can retire at 60 with 35 years service (or 33 with 4 year degree) correct? I will have 40.9 years service at 65, so am I entitled to go the NSP route, saying I want to retire at 60? If all the answers are positive and I retired before 60, the only stumbling blocks would be the actuarial reduction and that "death takes all"!!!
Thanks again for any replies.
 
Re: Another Teacher on AVC's v NSP

I found this on the Dept Education website:

What happens in the event of my death before completing purchase?
Credit will be given in calculating death benefits and, where appropriate, Spouses’ and Children's Pensions, for the full amount of notional service purchased by way of lump sum contribution or for the proportionate amount purchased by way of periodic contributions.
 
Re: Another Teacher on AVC's v NSP

I'm and C and C teacher. Will have 40 yrs service at 62 and have been buying those 2 years through notional service. Am 51 and now intend to retire at 55 or 56 [if the good lord spares me!] I will have purchased about a year of the two at that time and that will be allowed in my pension calculations. e.g service at 55 = 33 yrs + 1 yr notional service = 34 yrs. I am not sure if i can purchase the balance of the two years at that time by lump sum but have been advised that i can do so out of my AVC fund.

I will use my AVC to [1] bring my gratuity up to the full amount, [2] perhaps, if allowed purchase the missing notional service, and [3] the balance will supplement my pension.

In general i believe that it is better to purchase notional service before AVCs but this might not apply in all cases and you have to allow for the fact that AVC funds have not been performing very well.

If you have 40 yrs and 9 mths at 65 and you are able to purchase notional service from 60 you should be able to buy 4 yrs and 3mths.

Hope this helps?
 
Re: Another Teacher on AVC's v NSP

mjb said:
I'm and C and C teacher. Will have 40 yrs service at 62 and have been buying those 2 years through notional service. Am 51 and now intend to retire at 55 or 56 [if the good lord spares me!] I will have purchased about a year of the two at that time and that will be allowed in my pension calculations. e.g service at 55 = 33 yrs + 1 yr notional service = 34 yrs. I am not sure if i can purchase the balance of the two years at that time by lump sum but have been advised that i can do so out of my AVC fund.

I will use my AVC to [1] bring my gratuity up to the full amount, [2] perhaps, if allowed purchase the missing notional service, and [3] the balance will supplement my pension.

In general i believe that it is better to purchase notional service before AVCs but this might not apply in all cases and you have to allow for the fact that AVC funds have not been performing very well.

If you have 40 yrs and 9 mths at 65 and you are able to purchase notional service from 60 you should be able to buy 4 yrs and 3mths.

Hope this helps?
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you can purchase nsp with your avc but the fact that your goin early im nearly sure rules this out. have you informed your dept your goin early have they applied a reduction on your purchased added yrs?
 
Re: Another Teacher on AVC's v NSP

Thanks to everyone for the information, there is definitely food for thought. I now need to get in touch with the DES or my employer to find out the costs!
 
Re: Another Teacher on AVC's v NSP

mula said:
you can purchase nsp with your avc but the fact that your goin early im nearly sure rules this out. have you informed your dept your goin early have they applied a reduction on your purchased added yrs?
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Well done on an informative thread. Like Cord I intend to 'bail out' with 33yrs service aged 55yrs, 2 yrs for degree.(I am 35 now). I can buy 1 year NSP, and I am paying into a Marsh AVC for now anyway, but my query is, Is it a good idea to let my employer know I intend to go early at this stage, Please explain what 'applied a reduction on your purchased added yrs' stated by Mula above means.
 
Re: Another Teacher on AVC's v NSP

willbee said:
Well done on an informative thread. Like Cord I intend to 'bail out' with 33yrs service aged 55yrs, 2 yrs for degree.(I am 35 now). I can buy 1 year NSP, and I am paying into a Marsh AVC for now anyway, but my query is, Is it a good idea to let my employer know I intend to go early at this stage, Please explain what 'applied a reduction on your purchased added yrs' stated by Mula above means.
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nsp's are only available if your short service at your NRA. if you purchase service that your short at 60 let say but intend to retire at 55 then the dept will apply a reduction on the yrs you have actual bought at 55. this reduction is not pro rata so you will end up getting less yrs then you actually paid for. You would need to contact your employer to find out exactly what that reduction would be.

mula
 
Re: Another Teacher on AVC's v NSP

mula said:
if you purchase service that your short at 60 let say but intend to retire at 55 then the dept will apply a reduction on the yrs you have actual bought at 55.
mula
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Thanks for the reply. This is exactly what I intend to do ,God Willing. I am paying in to an Marsh AVC at the moment also, to try make up whatever difference their is going to be.
 
Hello all again!
Just to update the thread and share what I am doing, probably hoping that someone might say that it's the correct way to go!!?? I have (next week) frozen my Marsh AVC, (wrong word), stopped paying it to it. I had contacted Marsh about transferring costs, there are none, I was told. They seem a little bit better versed than two months ago. I still can't help feeling that the unions are getting some %, but that's another story being followed else where!! I have (next week) begun to buy some years back(NS), to be more accurate 5.0794 years at a cost of 2.10% per year, per year, allowing me to jump at 60. But my nice employers know that I want to retire at 58, so they quoted me a reduction from the mentioned to 3.6696 years pension and of 4.0378 years lump sum. Good ? Bad? Here's another question, so I will be short 1.4098 years at 58, can I buy those years with my lump sump?? But then I kick the bucket at 57 and there goes all that planning!!
 
cord said:
Hello all again!
Just to update the thread and share what I am doing, probably hoping that someone might say that it's the correct way to go!!?? I have (next week) frozen my Marsh AVC, (wrong word), stopped paying it to it. I had contacted Marsh about transferring costs, there are none, I was told. They seem a little bit better versed than two months ago. I still can't help feeling that the unions are getting some %, but that's another story being followed else where!! I have (next week) begun to buy some years back(NS), to be more accurate 5.0794 years at a cost of 2.10% per year, per year, allowing me to jump at 60. But my nice employers know that I want to retire at 58, so they quoted me a reduction from the mentioned to 3.6696 years pension and of 4.0378 years lump sum. Good ? Bad? Here's another question, so I will be short 1.4098 years at 58, can I buy those years with my lump sump?? But then I kick the bucket at 57 and there goes all that planning!!
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you wont be able to buy the 1.4 odd yrs at 58 through nsps with your lump sum as 58 is classed as early retirement.

in relation to the value of buying nsps at all you need to work out how much 2.1% will roughly be between now and retirement presuming your top of the scale this should be fairly straight foward.

work out how much your pension and lumpsum will increase after buying the added yrs

compare the cost of buying the nsps to the increase in your pension after tax and the increase in your lumpsum. this will give you a good idea how long you have to live for in order benefit from buying nsps

Also remember if you kick the bucket early your sposue is only entitled to half of the benefit of the nsps you bought.

NSP's are only a guaranteed return if you live long enough to get back more then you paid in.

mula
 
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Thanks Mula. I know I am going on about this, but it keeps the brain active!! Can I buy the 1.4 odd years at 60, having still retired at 58?
 
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