AVC encashment then reinvest

V

Valheru

Registered User
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Current pension fund work approx €10k, encashment calue €8k

If I use the encashment value to prop up my salary and max out pension contributions to Tax free limit, would I not be able to invest €12k instead of transferring €10k to new employer pension fund?
 
Are you sure that such an encashment would be considered part of your net relevant earnings which is what your pension tax/PRSI relief limit is based on as far as I know?
 
E.G.

I'm 38 years old so can invest 20% of my salary in my pension tax free. Say I'm earning 100k that would mean that I could invest 20k in my pension tax free.

Clubman are you saying that this 20k would be reduced by 8k if I encashed my AVC?
 
If you encash €10k then you will get €8k after tax.

Is that what you're saying?

Then what is your next step?
 
Take the 8k put into bank account. (say take home is 4k per month)

Use 8k to live off and 2 months gross salary (€6500) into pension, thereby putting 13k into pension instead of direct transfer €10k from previous employer pension.
 
Yes - but then it eats into how much you can contribute to your pension this year.

You turned €10k into €8k but will be able to convert that €8k into €13k which will in turn limit your ability to put in as much into your pension this year as you otherwise could (because of the 20% limit).

Is the €10k all Employee Contributions?
 
Yes, €10k are my contributions and can only afford to put 12% into pension from my monthly salary so want to max out my tax free contributions this year. New company also putting in 5% as well.
 
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