AVCs for a fixed-term contract employee...

An individual on a fixed term contract has access to their company's DC pension scheme. The employee makes AVCs in order to avail of higher rate marginal tax relief. In a scenario where the employment contract is not renewed in 2018, whose decision is it whether the employee is allowed to retain their funds in that scheme as a deferred member, given that 2 years' service has not been completed?


If the employee's contributions are returned and they have sufficient headroom at the standard rate of tax, are AVCs returned with tax applied back at 20%, even if 40% relief had been received the previous year? In this unusual scenario, could this been seen as a way of gaming the pension contribution relief and making a net tax credit?

It's allowed. The Revenue will have records of it though and if they see someone doing it repeatedly and think they are gaming the system, they'll come down on them like a ton of bricks.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

Thanks Steven - any idea who decides whether an ex-employee with <2 years service remains part of the company scheme? Obviously the employer contributions are lost to the individual if they exit...

It really depends.

Some insurance companies automatically refund the value of the contributions as they don't want the benefits sitting on their books, it gets messy to administer.
The trustees may also ask for the funds to be refunded or the decision may be left to the member. The employer contributions are lost regardless, the don't vest if the 2 years happens after the member has left. The trustees may also waive the 2 year statutory requirement and give the value of their contributions from day 1. If they do that, the refund option no longer applies.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)