AVC Cornmarket Suitable for a 20yo teacher?

M

munster man

Guest
My daughter started work as a temporary primary teacher Sept.05.

A consultant from Cornmarket is in the process of signing her up for an AVC policy, but I have advised her to wait a few years before taking out this policy as she is very young (still only twenty). If she continues teaching she will have her full 40 years service at age sixty.

I need advice on this matter as she seems to have her mind set on signing up with Cornmarket. She is on a salary of €34,250 and was told she would enhance her lump sum by signing up now and would also receive tax relief at 42%.

I would appreciate any help on this matter.

Thanks Munsterman.
 
I would be very careful here.

First of all, that Cornmarket rep IS NOT INDEPENDENT, and stands to make approx. €865 if your daughter signs up. So obviously they are pushing her to sign up.

Secondly, as she has started teaching at 20 (how so young?) then she will have 40 years service, and 40 years superannuation paid by age 60, so she has no need for an AVC. Her occupational pension wil be at the maximum.

The main use of an AVC is to enhance the pensions of people who will have less than 40 years paid superannuation.

Next, bear in mind that any savings accumulated through the AVC are not touchable, i.e. if she needs cash for whatever reason (deposit for a house, etc.), then she can't use any of those AVC savings.

Next, for a person so young, I would say save for a house, and think about the pension at age 30.
 
I would agree with Protocol. I joined the primary teaching profession as a mature graduate. Cornmarket were in like a bomb to sell me AVCs to 'make up' for years of service missed. I initially signed up to pay certain amount permonth with it to be reviewed two years later-to my annoyance I wasnt told about the set up charge or the subsequent charges when I increased the amount I paid. I am reconsidering my position with thid company at the moment after paying into an AVC for 8.5years.
Tread carefully!!
 
Do Cornmarket have a tie-up with the union representing primary teachers? I feel that they have such a relationship with the INO.

You may want to consider if Cornmarket offer favourable terms to teachers in terms of charges, allocation etc.

fluffy47-when did you set up this AVC scheme? I am pretty sure you should have been made aware of initial and subsequent charges at that time. If not, did you complain to Cornmarket?
 
Do a search for there is plenty of comment (most of it adverse).

Also try a google search for "teacher cornmarket pension".
 
Many thanks for all your thoughts. That certainly confirms my own thinking where AVC policies are concerned. Have been in touch with my daughter and she has listened to the voice of reason. I have to agree with FLUFFY 47 how Cornmarket are so quick to pounce on all the young teachers starting out.
Thanks again,
Munsterman.
 
fyi....if you are working as a primary school teacher for the Dept. you can "buy back years" from the Dept. AFAIC this is a much better investment to get to the full pension. If you have done significant sub-work you may be able to buy those years as well. Worth checking out with the Dept and or INTO..but not Cornmarket
 
munster man said:
I have to agree with FLUFFY 47 how Cornmarket are so quick to pounce on all the young teachers starting out.
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No law against that and their union has a relationship with Cornmarket, so I don't see what the problem is? 'Pounce' implies something sinister-you are free to make up your own mind on the matter.
 
Does the pension at age 60 deduct the state pension. Many schemes do. Revenue allow you to take an amount equivilant to 2/3 of final salary without deduction of state pension. AVC's are a tax efficient way of funding this. Also most schemes are based on years service and if you retire early you do not get your full pension ie 40/60 or 2/3
But I have to agree other posters here. Pension is not a number one priority at this point in your life especially as there is a fairly generous pension available anyway. I would advise her to save first, then get a house before considering increasing her pension.
 
I hope to summarise and merge a few good threads concerning Teachers AVC's here over the next few days.

aj
 
Do you envisage your daughter working for next 40 years without any breaks?

Even if your daughter did she would have the full 40 years service at retirement, however it is still worth contributing to an AVC as this will only give her 1/2 her final salary as a pension. Revenue will allow you fund up to 2/3 through an AVC.

Your daugher is paying just over 2,000 a year at the high rate of tax, she could put this into an AVC and get tax relief of 48%. (42% tax and 6%PRSI).

I think you may have advised her to do the wrong thing here. The earlier she starts contributing the better.
 
sunshine? said:
I think you may have advised her to do the wrong thing here. The earlier she starts contributing the better.
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sunshine is a big fan of Cornmarket and has argued in favour of same versus fee-based brokers elsewhere on AAM.

The idea of a 20 year old who is in a state superannuation scheme starting an AVC plan is simply ludicrous.

This young woman will have 45 years of service come her normal retirement age - retirement at age 60 does not exist any longer for new starters in the teaching profession. She will have overpaid contributions by 5 years for no extra benefit - so she could take a full (aggregated) 5 year career break (the maximum allowed by the Department of Education) across her career and still get a full superannuation pension.

There are, of course, other things that may be capable of being funded (the equivalent of the state pension;the Revenue allowed difference between a 150% lump sum and the 16.67% pension foregone; any additional earnings).

The OP's daughter will have plenty of time in the future to fund for these issues - if she so chooses. But she shouldn't dream of doing so before she has her finances sorted i.e. house bought etc.

And she should be made aware that if she decides to go the Cornmarket rather than fee-based AVC route she'll need to pay in a hell of a lot more to fund Cornmarket's/Irish Life's astonishing set up fees, ongoing monthly fee, deductions from every contribution and annual management fee. sunshine may have omitted to mention these in error.
 
sunshine? said:
I think you may have advised her to do the wrong thing here. The earlier she starts contributing the better.
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Another view:

[FONT=Verdana, Arial, Helvetica, sans-serif]Saving through a Pension Scheme
[/FONT]
[FONT=Verdana, Arial, Helvetica, sans-serif]FOUR SITUATIONS WHEN A PENSION FUND MIGHT NOT BE ADVISABLE

[/FONT] [FONT=Verdana, Arial, Helvetica, sans-serif]IF YOU AREN'T CONTRIBUTING THE MAXIMUM TO YOUR SPECIAL SAVINGS ACCOUNT
The Special Savings Account is more tax attractive than contributing to a pension. Don't contribute to a pension if you are not putting in the maximum €254 per month into your SSA.[/FONT]

[FONT=Verdana, Arial, Helvetica, sans-serif]IF YOU DON'T OWN YOUR OWN HOME
Your first investment priority has to be to own your own home. Many people start off a pension in their early 20s frightened by salesman's mantra : "You cannot be too young to start a pension". This should be rephrased "You cannot be too young to start saving". You will need all your money for a deposit on a house and that takes priority over everything including a pension.[/FONT]
[FONT=Verdana, Arial, Helvetica, sans-serif]
[/FONT][FONT=Verdana, Arial, Helvetica, sans-serif]IF YOU HAVE A BIG MORTGAGE OR OTHER BORROWINGS
After buying a house, your next priority is to get your mortgage down to a comfortable level. What is comfortable depends on a number of factors: The security of your job, your career prospects and the value of your home in relation to your mortgage. As a general guide, if your job is reasonably secure, anything over twice your salary is uncomfortable. Don't start a pension until your mortgage is down to less than twice your salary.[/FONT]
[FONT=Verdana, Arial, Helvetica, sans-serif]
[/FONT][FONT=Verdana, Arial, Helvetica, sans-serif]IF YOU ARE PAYING TAX AT THE LOWER TAX RATE
Pensions are only attractive if they save you tax at the top rate of 42%. If you are on the 20% band, don't bother with a pension. You might end up in a situation where you save tax at 20% only to pay it at 42% on your retirement.[/FONT]
Click to expand...
 
Oystermans point re retirement age is crucial to this-as the girl in question started her service after 1st April 2004 she may not retire before 65. So AVC at this point a waste of money. However if she were to take time off later extra to 5 yr.career break, eg study leave, parental leave, they might be useful-but direct from dept. of Ed-not from Cornmarket!From anecdotal evidence (Am a teacher) Cornmarket agents do not make this clear.
She should consider some form of Salary Protection though.
 
I am a teacher and was going to sign up with them, but after seeing the charges I am not going to bother, they charge massive fees if you want to change the amount you want to put in each year, also theres a 5 % management charge for everything you put in... so say you put in €100 a year you giving them €60 a year for management... ie comission.....


rang him today and he aint too happy, told him he wasnt truthful with me... he didnt like it started telling me i need an AVC.....

told him he was right i do...but not with him :)
 
munster man said:
My daughter started work as a temporary primary teacher Sept.05.

A consultant from Cornmarket is in the process of signing her up for an AVC policy, but I have advised her to wait a few years before taking out this policy as she is very young (still only twenty). If she continues teaching she will have her full 40 years service at age sixty.

I need advice on this matter as she seems to have her mind set on signing up with Cornmarket. She is on a salary of €34,250 and was told she would enhance her lump sum by signing up now and would also receive tax relief at 42%.

I would appreciate any help on this matter.

Thanks Munsterman.
Click to expand...

hi munster man

imho your daughter is far to young to be taking out an avc. income protection should be her first priorty and the rep should have had this at the top of their recommmendations. protecting your daughters lively hood is far more important then avcs atm

in relation to retirement
your daughter has the option to retire from 55 onwards on a reduced pension the details of which are available at www.cspensions.gov.ie

i suggest you have a good read of this especially the FAQ section. they also have a pension modeller system which allows you to see the effects of early retirement on your daughters superannuation benefits.

with the increase in the amount you are allowed to put away for retirement (up to 40% depending on age) your daughter should be in no rush to fund for her retirement at this stage
 
I have moved the discussion concerning income protection to the insurance forum.

I have been unable to get any information concerning teachers superannuation on the civil service pensions web site. Perhaps someone could post the link?

aj
 
Oysterman "retirement at age 60 does not exist any longer for new starters in the teaching profession"


While your daughters Nomal Retirement Age is 65, she does have the option of retiring from 55 onwards under 'Cost Neutral Early Retirement'.
If she was to retire at 55 she would receive 58.2% of her pension entitlement and 82.4% of her lumpsum entitlement.

Lets say for example a teacher had a salary of 50,000 at the age of 55 with 35 years superannuated service. (What your daughter would have at this age)
35/80 of 50,000 = 21,875 but when cost neutral is applied this would only give a pension of 12,731.

108/80 of 50,000 = 67500 again when cost neutral is applied this gives 55,620.

As a teacher gets closer to their Normal Retirement Age, the reduction is less severe.

I would completely agree that getting on the property ladder and taking out income protection are a greater priority at the moment, but if your daughter has intentions of retiring early provisions for this should also be made. (With Cornmarket or with whoever else has some expertise in this area)
 
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