Any problem with short-term PRSA AVC for 60 yr old teacher?

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Protocol

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This is the scenario.

60-yr old teacher with 38/40 years service.

Paying 6.5% superannuation pension and a small % AVC with Cornmarket, let's assume 10% of salary total.

Would it be possible to do the following:
  • start a PRSA AVC
  • put in 30% of 2007 earnings as a lump-sum, to use up all 40% tax relief
  • and then continue to put in up to 30% of earnings in 2008
  • retire in Augustv 2008 or 2009
So the PRSA AVC plan would have a very short life, say 1-2yrs, with premium contributions of 30k-40k.

The main aim of this plan is to take advantage of substantial tax relief.

Can anybody see any problems?
 
Protocol said:
This is the scenario.

60-yr old teacher with 38/40 years service.

Paying 6.5% superannuation pension and a small % AVC with Cornmarket, let's assume 10% of salary total.

Would it be possible to do the following:
  • start a PRSA AVC
  • put in 30% of 2007 earnings as a lump-sum, to use up all 40% tax relief
  • and then continue to put in up to 30% of earnings in 2008
  • retire in Augustv 2008 or 2009
So the PRSA AVC plan would have a very short life, say 1-2yrs, with premium contributions of 30k-40k.

The main aim of this plan is to take advantage of substantial tax relief.

Can anybody see any problems?
Click to expand...

no sounds good,

but why keep cornmarket avc going?

have you looked into tax treatment after retirement of your avc? as your only short 2 years whcih leaves only a small amount availble to draw down tax free.

mula
 
Last edited:
Thanks for your reply.

Don't really want to use Cornmarket due to higher charges.

Would prefer to use a discount broker, .e.g. www.labrokers.ie and maybe Eagle Star PRSA AVC.

Oh I get you now, you mean stop the Cornmarket AVC and put 33.5% of income into PRSA AVC? Maybe.

I need to think more about how the benefits can be paid out.
 
Eagle Star do have a minimum term of two years to Normal Retirement Age (NRA). On an AVC PRSA, the NRA must be the same as that of the main scheme. What's your NRA?

If it's less than 2 years away, you may be able to get your broker to "convince" Eagle Star to accept a short term PRSA.

If your NRA is longer than 2 years away, there's no problem setting up the AVC PRSA with an NRA of, say, 65 but then going ahead and withdrawing your benefits later this year or early next.

Hope this makes sense.
 
Thanks for the replies.

The NRA is 65, as in that is when the teacher has to retire.

But, they can actually retire at any age from 60 onwards.

So it seems to be possible for a 60-year-old to set up a PRSA AVC now, start it off with 20k, and continue to contribute for 12-18 months.

One more question: he will receive 38 *(3/80) = 114/80 of final salary as a gratuity (tax-free lump-sum). How much of the accumulated PRSA AVC can he take tax free?
 
Protocol said:
One more question: he will receive 38 *(3/80) = 114/80 of final salary as a gratuity (tax-free lump-sum). How much of the accumulated PRSA AVC can he take tax free?
Click to expand...

6/80, to bring him up to 120/80 the Revenue maximum.
 
Assuming the teacher is paid by the Department of Education, the superannuation scheme will provide 114/80s of his/her Department salary which can be topped up with the 6/80s tax-free from the PRSA AVC. That's clear enough.

However, if the teacher has any additional earnings from the school (paid privately) for extra work like looking after sports or whatever, can 1.5 times the total of those earnings be taken tax-free in addition?

I guess the question I'm asking is as follows: 'Does a PRSA potentially provide retirement benefits for income from a number of sources simultaneously?'
 
oysterman said:
However, if the teacher has any additional earnings from the school (paid privately) for extra work like looking after sports or whatever, can 1.5 times the total of those earnings be taken tax-free in addition?
Click to expand...

Yes, an AVC or AVC PRSA can be used to bridge the gap between pensionable salary as defined by the scheme rules and actual salary as defined by Revenue. Actual salary can include additional earnings like the example you give.
 
oysterman said:
Assuming the teacher is paid by the Department of Education, the superannuation scheme will provide 114/80s of his/her Department salary which can be topped up with the 6/80s tax-free from the PRSA AVC. That's clear enough.

However, if the teacher has any additional earnings from the school (paid privately) for extra work like looking after sports or whatever, can 1.5 times the total of those earnings be taken tax-free in addition?

I guess the question I'm asking is as follows: 'Does a PRSA potentially provide retirement benefits for income from a number of sources simultaneously?'
Click to expand...

its 1.5 times the average of the best 3 consective years of non pensionable income in the 10 yrs up to retirement
 
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