AVC and overfunding of Civil Service pensions

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pudser

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Hi
If I remain in the service of the state I will be able to retire with a full pension at 60.
I am considering taking out an avc and am in a position to max my contributions.I hope to use this to fund the purchase of land in a pension morgage scenario.
What then happens if my pension is overfunded at 60 and greater than the allowable 66%?
Do the revenue penalise me or am I allowed transfer the total avc generated fund into an ARF

Thanks

Pudser
 
In simple terms, you cannot even start an AVC arrangement if the likely outcome is that your overall benefits will exceed Revenue limits. It is the responsibility of the AVC provider to check your overall benefits and if by contributing AVCs (particularly at the max) you are likely to exceed the limit then they should not even accept the business.
This calculation is required as part of the Revenue approval process for the AVC.
If you have potentially full service benefits benefits, there may still be some scope for AVCs:
  • if your have some income that is not pensionable - e.g. bonus, overtime etc.
  • because the total "pension value" of your State benefits (pension of 50% plus tax-free lump sum of 150%) can be calculated to be less than the Revenue max of 66%
  • because you could seek to increase the Widows Pension from 50% of 50% to 100% of 50%.
 
Thanks Conan,
The avc provider has checked it out and as I am paying class A prsi at the moment ,not permanent, he says I am entitled to contribute.

Also if I did not have full service at 60 due to career breaks etc would that entitle me to avail of the avcs
pudser
 
There's another big area of funding potential since you are a PRSI A-class payer.....

The Revenue limit is 2/3 plus the OACP. Your OACP and civil service pensions are integrated. Therefore, you should be able to fund for the OACP seperately, Given the level of increases in same at present, this should provide huge scope for additional funding (subject to age related contribution limits).
 
Can anyone expand on Oysterman's point? I am paying class A1 pension as I started work after April 1995 and would potentially earn 40 years service when I hit 65. However I do not intend to work full time or to work in the civil service until i am 65 so want to pay an AVC.

How can I ensure that i don't breach Revenue limits on my pension, and maximise the OACP element??
 
pudser said:
Hi
If I remain in the service of the state I will be able to retire with a full pension at 60.
I am considering taking out an avc and am in a position to max my contributions.I hope to use this to fund the purchase of land in a pension morgage scenario.
What then happens if my pension is overfunded at 60 and greater than the allowable 66%?
Do the revenue penalise me or am I allowed transfer the total avc generated fund into an ARF

Thanks

Pudser
Click to expand...

cant see you being able to over fund especially if your A1 and married
 
Can anyone expand on Oysterman's point?
Click to expand...

Your actual salary might be €50,000 but instead of funding for a pension of half your actual salary i.e. €25,000 (ignoring future salary increases) the scheme funds for half salary including the Old Age Contributory Pension. You are permitted to fund for this gap yourself by way of AVCs.

Liam D. Ferguson
www.ferga.com
 
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