Moneymakeover AVCs or not?

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Grubber2000

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Personal details

Your age: 39
Your spouse's age: 36


Number and age of children: 3 - 7, 5,1, one on the way


Income and expenditure
Annual gross income from employment or profession: €170k salary + €20k farm income
Annual gross income of spouse/partner: 30k rental income / wife is taking a few years out to mind children

Monthly take-home pay: ~€10,500

Type of employment - e.g. Employee or self-employed. Employed public sector - very secure job / + farm


In general are you:
(b) saving 5k+ per month

Summary of Assets and Liabilities
Family home value: €700k
Mortgage on family home: €0k


Cash: €200k
Defined Contribution pension fund: N/A
Company shares : N/a
Buy to Let Property value: 450k
Buy to let Mortgage: 0

Farmland worth 200k - no loans

Total net assets: €1550k (not including pensions)

No debt

Do you pay off your full credit card balance each month? Don't have one
If not, what is the balance on your credit card? 0

Pension information

Value of pension fund:

Me public sector single scheme pension since 2018 - average salary over these years has been approx. €110k, current salary 170k rising to approx 200k over the next few years.
Also - thanks to askaboutmoney I have 11 years of UK pension contributions which I intend to keep paying until I get the full pension

Wife:
Public sector single scheme - 10 years currently not sure what this is worth but not currently in employment but will hopefully go back

Buy to let properties
Apartment worth 450k - rented for 30k per anum

Other savings and investments:


Other information which might be relevant

We will potentially (hopefully in the distant future) both individually receive significant inheritances which will make us wealthy in our older years

What specific question do you have or what issues are of concern to you?
I'm currently working on my tax return for 2025 and trying to decide if I should be making AVCs or not.
Much of the financial advice I see specific to Ireland seems to encourage as much AVCs as possible but I feel I already have very significant pension provision and that I will be taxed heavily when (if!?) I do reach pension age.
I have spare cash that I could use to start maxing AVCs but am unsure if this is wise or not given my current pension provision.
 
I ran a broad estimate on the pension side of this. Based on the figures you gave, AVCs probably should not be ruled out, but I would not simply max them blindly either.

The key point is that your projected Single Scheme value needs to be tested against both the Revenue maximum funding limit and the SFT at the time you crystallise benefits. For 2025 specifically, the rough remaining tax-relievable AVC room looks closer to c. €13k, subject to payroll/tax checks.

I put the workings and assumptions here if useful: https://planeir.ie/app/session.html...k=sbHfL2ftaIDXUOvhSkxCnjfkk5gCvSoQKi9v1XxpKrM
 
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Just a recent lesson I learned about AVCs which I’m sure most people knew but I hadn’t read the small print when I attended a presentation and decided to add to my pension fund using AVCs.

I had assumed that I could access my AVCs when i chose to retire. Turns out I can only access them when I access the DB scheme, aged 65. Even though they aren’t in the DB scheme it’s the same employer. I had always seen them as something I could draw on if I wanted to retire early. Turns out I can’t. So if that was part of your plan, it needs careful consideration
 
Annieindublin said:
I had always seen them as something I could draw on if I wanted to retire early. Turns out I can’t. So if that was part of your plan, it needs careful consideration
Click to expand...

You get access to the AVC when you start drawing on the DB pension. Some DB schemes allow early retirement, such as the Single Scheme in the OP's case.
 
Unfortunately I can’t access my DB scheme until I turn 65. The rules allow for early access if the trustees allow and they don’t. The scheme has professional trustees now. And they don’t permit early access. They have only approved one instance in recent years and that was someone with terminal cancel.

Not a big deal at this stage but the links between the 2 schemes was news to me. And I suspect other people in the private sector are similar
 
Annieindublin said:
Not a big deal at this stage but the links between the 2 schemes was news to me. And I suspect other people in the private sector are similar
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I wouldn't be surprised if many people weren't aware of this link/limitation. Our fragmented/piecemeal pension landscape is full of (unnecessary?) complications and nuances. It's difficult to understand and be aware of all of them... :confused:
 
Grubber2000 said:
I'm currently working on my tax return for 2025 and trying to decide if I should be making AVCs or not.
Much of the financial advice I see specific to Ireland seems to encourage as much AVCs as possible but I feel I already have very significant pension provision and that I will be taxed heavily when (if!?) I do reach pension age.
I have spare cash that I could use to start maxing AVCs but am unsure if this is wise or not given my current pension provision.
Click to expand...
This is hard to answer unless we know your retirement goals, and how much money you think you will need. With high-salary SPSPS, farm and rental income, you could retire very early and be just fine. You need a sense of how much income you want in order to decide whether losing access to AVC money for a decade or two is worth it.

In general you're right that AVCs will mostly go in at higher rate and come out at higher rate. Your lump sum should have some room (1.5x final salary, SPSPS lump sum won't eat it all) and then you can take another 300k at 20%. That's all tax-free money. But even after that, by putting money in AVC you are sheltering it from punitive CGT and deemed disposal. You get tax-free growth. Even though it comes out at 40%, it still easily beats other options, like taxable accounts

Edit: your biggest concern is probably hitting the standard fund threshold. Adding AVCs to salary increases could easily get you there, even with the cap rising over the next decade. This may well push you towards early retirement

Whether that's worthwhile for you depends on the answer to the first para. Worth remember that this is a pretty marginal decision. You're extremely well set. I think in your position I would be spending the money I have on a nicer and easier life with my young children.
 
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Post in thread 'Starting a PRSA with zero earned income'

Starting a PRSA with zero earned income

Hi, 45 F here. Not working currently. Upskilling and exploring the possibility of setting up my own business. I am in the fortunate position that I have some additional cash that I can invest for the longer term (15 to 20 years at least). I considered setting up a PRSA and investing a lump...
www.askaboutmoney.com

This strategy could be beneficial to people wanting to retire early but are locked into their occupation scheme until age 65.

If they are planning early retirement in the next 5 to 10 years, this extra unlinked PRSA could accumulate tax free until they retire. If in early retirement they will have earnings of 20K or less they will get their ARF drawdowns tax free.
 
hilhid said:
... by putting money in AVC you are sheltering it from punitive CGT and deemed disposal. You get tax-free growth.
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Investments outside a pension subject to Capital gains tax also grow tax free. CGT is only paid when you sell. CGT is currently less than the higher rate of income tax as is deemed disposal/exit tax.
 
ClubMan said:
You can definitely access PRSA from age 50.
You sign a declaration stating that you've ceased paid employment but that doesn't bar you from subsequently taking up paid work again if you choose to do so.
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are you saying this because you did this? i believe that is the case with occupational PRSA if you retire from the linked role, not individual ones
 
CharlieMac said:
Investments outside a pension subject to Capital gains tax also grow tax free. CGT is only paid when you sell. CGT is currently less than the higher rate of income tax as is deemed disposal/exit tax.
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sure but a) you don't get tax relief on the way in and b) your investment choices are then limited to individual stocks. if you invest in funds or ETFs (which you probably should) then you get deemed disposal
 

Early retirement - pensionsauthority

Most pension arrangements in the private sector permit members to retire early in certain circumstances. However, the benefits you receive are likely to be lower than they would otherwise be at normal retirement age.
pensionsauthority.ie
Under personal retirement savings account arrangements, early retirement from an employment is possible from age 50.
Click to expand...
 
Impressed you're earning that salary in public sector, are you civil service or healthcare mind me asking?

@Annieindublin madness you can't access your avc/pension until 65, didn't even know this was a thing, especially in private sector
 
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