AVC for Civil Servant with expected 40yrs service

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spinmaster

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Civil Servant, Mid 40s - Are AVCs worth it if I'm likely to have 40+ years' service?

I joined civil servant mid 2000s so I'm in the pre-2013 public service pension scheme and pay Class A PRSI.

Assuming I remain in the Civil Service until retirement at age 65, I would expect to have over 40 years pensionable service.

I'm trying to decide whether it makes financial sense to start AVCs at this stage. I understand the tax advantages, but I'm wondering whether AVCs are less beneficial for someone who is already likely to have a full public service pension and State Pension entitlement.

I don't have another obvious need for surplus income (eg mortgage reduction), other than considering non-pension investments

Thanks in advance.
 
The AVCs can bridge the difference in benefits give by the scheme (based on pensionable salary) and the maximum benefits allowed by Revenue (based on actual gross employment earnings). To make your decision, you would need to look into the numbers.
 
Fortune said:
benefits give by the scheme (based on pensionable salary)
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Is it correct to say that for someone with 40+ years service that would generally (always?) be half final salary as an ongoing retirement income and 1.5 times final salary as a tax free lump sum? Or is it more nuanced than that, e.g. depending on the exact scheme or area of the public service etc.?
 
Broadly speaking, yes.

Some exceptions: full service is 20 years for TDs, 30 years for some grades like Gardai, soldiers, psy nurses, etc.

Also, this applies to public servants in the the schemes before the SPSPS.

The SPSPS bases the benefits on career-average earnings, not final earnings.
 
The arguments for AVCs are weaker than for someone in a different position. You'll get 40% tax relief on the contributions and you'll get tax-free growth on the funds for 20 years or so. When you retire, you can use part of the AVC fund to top up your lump sum to the maximum allowed by Revenue, but the scope for this may be small with 40 years' service. After that, however you withdraw the balance - an annuity of an ARF - the withdrawals will be taxed at 40%. So 40% relief on the way in and 40% tax on the way out. If you don't need the money for another 20 years then the tax-free growth still should beat other forms of non-pension investing, but see also what Simon Harris's shiny new savings scheme brings when it's announced in October.
 
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Will you still feel the same about the job in 10 or 15 years time? What if you have had enough at age 62? I am a teacher and
I am buying an AVC so that I will have the option of retiring a few years earlier. My retirement age is 60 and I have just over 3 years left but I feel like I have just run a marathon where the first 23 miles were okay but I have sort of hit a wall and the last 3 miles will be much harder than the first! I have also noticed that I am being passed over for a number of training opportunities etc. and there is a whole new wave of younger teachers who are nice to me but not interested in me as an equal as they see me as an old man who is the same age as their granda!

With the AVC I will be able to retire next year if I need to get out! I might keep going and end up age 60 with a full pension plus the AVC - but I don't mind the prospect of paying 40% tax. Maybe by the time you retire the tax bands will be different and you don't hit the high rate until @ 60k etc.
 
sidzer said:
I have just over 3 years left but I feel like I have just run a marathon where the first 23 miles were okay but I have sort of hit a wall and the last 3 miles will be much harder than the first! I have also noticed that I am being passed over for a number of training opportunities etc. and there is a whole new wave of younger teachers who are nice to me but not interested in me as an equal as they see me as an old man who is the same age as their granda!
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My poor dear wife is in the same boat. <3 years to go and she is gasping for air at this stage trying to stay afloat. It is disturbing how draining the teaching profession has become for the older cohort. Perhaps the younger teachers are more able for it, or just oblivious or less diligent or vocationally centred, but definitely there is a huge generation gap.

Incidentally, on a related note, with reference to another thread I was reading, if a teacher retires before the COAP age of 66 are they entitled to seek jobseekers/supplementary allowance, or are teachers pensions calculated as complete taking all that into account already, supplemented by whatever you have set aside in your AVC?
 
I'd say Simon Harris's shiny new scheme will be better option for your money in your situation. Only real benefit for AVCs imo is tax free lump sum shortfall. If you decide to go early top up in the few years before to make up difference. Bear in mind that if you do AVC's through Cornmarket, IPF or similar it is probable that the money "invested" will end up going down in value because of their fees.
 
Mayo1969 said:
Incidentally, on a related note, with reference to another thread I was reading, if a teacher retires before the COAP age of 66 are they entitled to seek jobseekers/supplementary allowance, or are teachers pensions calculated as complete taking all that into account already, supplemented by whatever you have set aside in your AVC?
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It is similar to that of other PS retirees, so it depends on which specific scheme she is in and when she entered service.

If she is a pre-1995 entrant she likely is paying modified rate PRSI (Class B/D) and will have no eligibility for a Supplementary.

But as you refer to the COAP I assume she entered after that date and, in any event, pays Class A PRSI. If so it depends on her "Normal Retirement Age". If she entered before April 2004 it should be 60 and so she would be eligible for a Supplementary from then - if she meets the standard conditions. Post April 2004 entrants have a normal retirement age of 65, so no eligibility before that. Eligibility for Jobseekers Benefit is per the standard Social Welfare criteria and she could apply but it would be and either/or with Supplementary and not both.
 
Agree with other posters, over 20. years ago I purchased service to give me full service at 65. In the end 20 years later I retired at 60 with 35 years service. Delighted to have retired at 60, and when I purchased the service I felt I enjoyed the job and over the period of my career, that view changed.
 
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