avc overfunding earlyretirment

C

Charlie

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Can anyone explain overfunding with regard to AVCs & also the implication vis a vie early retirment
This question has been asked several times on this forum but no answers
 
avc overfunding earlyretirment

For what it's worth there are limits on the amount that a person can contribute to a pension scheme (and/or AVC plan to supplement an occupational scheme) in terms of tax relief and total funding and, as far as I know, also limits on the total amount that one can derive from a scheme relative to one's retirement income etc. These links might contain more detailed and authoritative information on these limits:


www.pensionsboard.ie/
 
In brief......

The treatment of AVC surpluses is normally dependant on how the surplus arose.

Typically, the revenue state that AVCs must be used to purchase benefits first ( i.e. before the employer / employee contributions ).

However where the surplus arises due to unforeseen circumstances the revenue may consider the premium to have been paid in error and unwind that portion. Though doI won't speculate on what the revenue will allow/disallow.
 
Hi Charlie

The basic principle is that you should not pay so much AVCs that the total projected benefit on retirement at Normal Retirement Age (NRA) from all sources (employer's pension plan, AVCs, any previous pensions) does not exceed certain limits set out by the Revenue.

In broad terms, the maximum pension at NRA is 2/3rds of total pay. The State pension can be ignored. On early retirement, the maximum pension is scaled back on a proportionate basis. For very short service (less than 10 years) a sliding scale applies.

If you retire (whether early or at NRA) and your AVCs are such that Revenue limits are breached, the Revenue can insist that the benefit from your employer's pension plan must be reduced to keep overall benefits within Revenue limits or they can permit a refund of part of your AVC fund, subject to income tax and PRSI. As Alan says, there are no hard and fast rules on when they will permit a refund and each case will be considered on its merits.

Regards
Homer
 
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