AVC options for new Public Servant

Discussion in 'Public sector pensions' started by world201812, 5 Feb 2019.

  1. world201812

    world201812 Registered User

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    Recently joined the public service at 35 years of age. Trying to get my head around pension options/possibilities, and the possible option of one day being able to retire early, stop laughing!

    I know 68 is currently the retirement age which I can retire at, but if I want to finish up in work early, what do I need to do to retire early in light of fact that there appears to be absolutely no information available on ‘buying back of years’ for new entrants.

    I understand there is the possibility of retiring early on cost neutral basis, from 55 years of age.

    In the interim, how do I boost my pension pot?

    My only option is to take out a private AVC, and if feasible lob in up to 20% of my gross income annually?

    The way to calculate the max I can put into an AVC each year is to calculate 20% of my gross salary, and subtract my existing annual pension contribution at source, and the remaining amount in euros is the max of what I can put into the AVC annually?

    (The Single Service scheme says I can make an AVC to an AVC Personal Retirement Savings Account or a trade union-affiliated AVC Scheme).

    If I go with AVC option as notional service not an option, how do I make the contributions and claim tax back etc?

    Can I make monthly/weekly/or other regular contributions and get the tax rebate at the time, or must I make a lump sum payment at the end of the calendar year?

    To give an example, in a previous private sector employment, I made an AVC payment for 2016 in January 2017, and then some months after filled tax return for 2016 and got tax money back. Is this the way it should be done going forward.

    On salary protection, I’ve joined a trade union and in the blurb it says they provide a fund of X if sick once you are a member, so is this sufficient, or should take out Salary Protection/income protection from who?...What is the cost?......Any tax rebate?

    I’ve seen in previous posts, people say ‘I advise PS to get a PRSA-AVC from a discount broker, same funds, lower fees’, is there a list of these/costs/where to go? Thanks!
     
  2. NoRegretsCoyote

    NoRegretsCoyote Frequent Poster

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    @world201812

    You have to ask your employer about purchase of notional service. There is very little in the public domain about it. The relative benefits of AVCs versus notional service depend a bit on your age. There are some threads on it if you search.

    You can get income protection from a broker associated with the union. I don't think it is automatic from your union sub.
     
  3. world201812

    world201812 Registered User

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    Many thanks NoRegretsCoyote. I haven't asked my employer, public sector, but based on the single scheme website, there is simply no option to purchase notional service.
    I'll get on to the union about income protection.
     
  4. NoRegretsCoyote

    NoRegretsCoyote Frequent Poster

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    @world201812 - may be different for single scheme members. Check with your HR.

    Check around for income protection. There may be better deals than what the union offers you.
     
  5. PaddyBloggit

    PaddyBloggit Frequent Poster

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  6. Early Riser

    Early Riser Frequent Poster

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    There is (as yet, at least) no notional service purchase option in the single scheme. Its an AVC through salary deduction or a PRSA - AVC.
     
  7. world201812

    world201812 Registered User

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    Hi all,

    Thanks for the feedback, I had a look at pensions authority website, and the booklet.

    Although the latter specifically refers to being for pre-2010 recruits, and the calculator tool is useless (or else I can’t use it!)..

    The first half of the booklet refers to Purchasing of Notional Service which isn’t an option.

    So my options appear to be

    1. AVC: The booklet appears to state there should be one scheme per union, given what I’ve read on forums, I was told some union AVC schemes were to be avoided/extortionate.



      -On the AVC, it can be taken as tax free gratuity or taxable lump sum at what age? Booklet doesn’t say.
    2. PRSA as AVC : This appears to specifically apply to public servants like me only?

    Which is better for me as late entrant to public servant, hoping to retire earlier than 68 or 70, in mid-50’s?

    It also says in booklet, that details of PRSA providers are on Authority website, this doesn’t appear to be the case.

    Still, utterly confused in terms of my original post, is there any insurance firm I can contact who might advise and not charge me the world?! Thanks.
     
  8. shelley levine

    shelley levine Registered User

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    If your primary goal is retiring in your mid 50s then paying revenue maximum avcs to create a fund to top up your lump sum and create an Amrf/arf to supplement your pension income is what you need to do.

    Notional service is irrelevant in this context. Even if it was available it doesn’t suit your requirements as the purpose of it is not to fund for retirement in your 50s, it is to increase your lump sum and pension at your normal retirement age which in the new scheme is 68
     
  9. NoRegretsCoyote

    NoRegretsCoyote Frequent Poster

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    In time it may become possible to purchase notional service in the single scheme. As the share of public servants who are members becomes greater it could become an issue that unions will push.



    A good analogy is reduced pay for new teachers introduced in 2011. This was something that the INTO happily signed up for as it didn't impact existing members. They have changed their approach completely now that a good share of their membership is on a lower pay scale.
     
  10. GSheehy

    GSheehy Frequent Poster

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    Last edited: 8 Feb 2019
    There's a list of 'investment' discount brokers here.

    The only 'pension' discount proposition that isn't on this page (that I'm aware of) is www.prsa.ie , which I own.

    It's an execution only service and the products are underwritten by Zurich Life - none of the pension products have contribution charges (or exit penalties) and, for AVC - PRSA, the annual management charge is 1%. There's no additional fee/s for setting up a PRSA/Pension.
     
    Last edited: 8 Feb 2019
  11. Early Riser

    Early Riser Frequent Poster

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    The PRSA-AVC or the AVC, whichever you go for, will be linked to your main pension scheme. You access it whenever you are accessing your main scheme's pension - when you take retirement.

    At that stage you can use the proceeds of the AVC (whichever type) to top up your tax free lump sum to the maximum allowed by Revenue. This will be calculated with reference to (i) the maximum which your could obtain under your main scheme terms had you full service, (2) your actual service (if less than 20 years) and (3)whether or not your retirement is before normal retirement age for the scheme.

    Anything remaining in the AVC fund can be transferred to an ARF/AMRF, to be drawn down as taxable income, or you could purchase an annuity.
     
  12. world201812

    world201812 Registered User

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    Many thanks for all your advice, and input.

    So Notional Service, and purchase of it, is something which (if available) only allows you to buy back years to allow you to retire at full term retirement wise, as opposed to early retirement. Thanks for that.

    Interesting, that if enough public servants seek notional service, unions may push for it. As a relative new recruit I’ve yet to hear one fellow public servant mention it, I only heard of the concept from a much older relation and ex-public servant. To be honest, for most public servants I’d say given existing pension levies etc, shelling out for notional service is last thing on their mind, but it would be interesting to at least be in the loop on it/know what options are. Love to know why they stopped offering notional service and/or giving information on it.

    Ger Sheehy - Thanks for that information. Will check out that link, and likely drop you a line directly. Much appreciated.

    Early Rise- Thanks for that supplementary information too. Much appreciated.

    Starting to slowly get my head around things!
     
  13. Markel

    Markel Registered User

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    The idea of notional service doesn't apply in the same way with the single scheme. Each year you work your salary is used to determine a euro amount of lump sum and annuity you are entitled to on normal retirement (indexed to inflation of course). Under old schemes your pension entitlement referenced years worked and your final salary etc. You could buy notional service to increase the years worked part of the calculation.

    If you were ever able to buy benefits under the single scheme you would be buying a certain amount of annuity and lump sum for your normal retirement. For this to be advantageous to you it would have to be cheaper than buying the same on the market.
     
  14. world201812

    world201812 Registered User

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    Hi all,

    Just want to bump this thread to check something, with a view to taking out an AVC in tandem with being a member of the new public sector pension scheme. Looking at options.

    Under the new scheme cost neutral early retirement from 55 years of age, am I right in thinking this is the minimum age for access to benefits?

    If someone had 20 years service, at circa 49k a year, and was 13 years shy of 68 and standard retirement age, what sort of benefits could they get, under cost neutral early retirement.

    Under the new scheme, the pension lump sum is 60k based on joining public sector at 35 and staying at 48k a year until 68, I understand in reality inflation and possibly promotion would enhance this.

    There is a cost neutral calculator on the new pension website, but once I inserted the above and looked at 20 years from now it showed ‘N/A’.

    If someone could advise or give some ball park ideas. Thank you.
     
  15. Early Riser

    Early Riser Frequent Poster

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    With a normal retirement age of 68 there would be an actuarial reduction to 64% for you pension and 96% for your lump sum if you take CNER at 55.
    I am not too familiar with the Single Scheme benefits but I roughly estimated that as working out about €35,000 for the lump sum and €3,650 annual pension ( based on a steady €48k salary, no allowances for inflation, etc. as you have stated).
    Yes, this would be the earliest access available for benefits.
     
  16. world201812

    world201812 Registered User

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    Hi Early Riser, thanks for this and swift response, those figures are sobering €3,650 annual pension is horrific, I’ll need to rethink my pension plan! Admittedly, one would hope there might be the odd promotion/inflation along the way.

    But if I manage to build up a private AVC PRSA over the next 20 odd years I can potentially draw 25% of this down from 55 too, in a lump sum, is this correct?

    Or have I misunderstood things. And also, does the 200k lifetime limit for PRSA impact on the public sector lump/pension, or totally separate?
     
  17. Early Riser

    Early Riser Frequent Poster

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    Last edited: 14 Feb 2019
    No - your avc (prsa or not) is linked to your main scheme. If you were retiring at 68 with 20 years service, Revenue would allow you to take the maximum lump sum available under the scheme - presumably 72,000 in this instance?
    However, there is a reduction for early retirement. If I remember right, it would be 20/33 × 72000 in your circumstances - about 44000? So if your main scheme pays 35000 you could draw another 9000 tax free from your AVC at 55.

    EDIT: Looking now at the Single Scheme Booklet. There doesn't appear to be a specific upper limit on the tax free lump sum as there were with previous public service schemes (Usually 120/80 * Pensionable Salary - based on 40 years max for pension purposes). So my assumption above re €72,000 beong the upper limit in your hypothetical example would seem incorrect.
    Therefore, am unable to say what tax free lump sum Revenue would allow you to take from an AVC in this example.
    Maybe someone else could advise?
     
    Last edited: 14 Feb 2019
  18. Early Riser

    Early Riser Frequent Poster

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    Just to say I edited my previous post regarding topping up the tax free lump sum from an AVC in the case of early retirement of a member of the Single Scheme. Anyone else know how this works?