Basic AVC/tax question

T

Toastin

Registered User
Messages
23
Hi,
I am about to change my monthly AVC contributions, to max-out my monthly tax free allowance. My main motivation for this is the fact that all of my earnings over €70k are taxed at 52% (income tax, prsi, USC). I am thinking of basically putting all my earnings over €70k into AVC's to avoid this high tax rate. I know I will ultimately pay tax on the money when I withdraw it but it will be at a much lower rate than 52% hopefully.

Question: am I correct in saying that, for example, if I earn €90k and I pay €20k into my pension then I will be taxed as if I only earned €70k? (assuming proper AVC allowance for my age)

Thanks
 
You would only pay income tax as if you earned 70k.
USC and Prsi will remain based on 90k.
 
Just follow up avc question rather then new thread, does overtime and bonus count towards 1.5times salary to work out allowable lump sum from avcs at retirement or is its just salary+shift premium if applicable?
Thanks
 
Last edited:
Presumably you're on a PS style DB and that's where you're getting the 1.5 times salary lump sum?

If so, AVCs I think would be separate to that and the rule is 25% tax free (I think the DB lump sum would be considered here so as not to go above 25% overall but others here know better than me)

My wife is in a DB scheme but when I read through the scheme rules there was mention of varying values based on say doing reduced hours (per contract) or having bought notional service but I don't recall the amount being bumped up because of overtime worked.
 
I have private sector db pesnion along with the dc scheme for my avcs where I'm planning to take my lump sum from, im using db scheme as salary in retirement so no lump sum from it. I think for people with DB and DC schemes if taking avcs as lump sum it is 1.5 times salary and not 25% of pot. My question is does overtime and bonus count towards salary used to calculate 1.5times for lump sum?
 
Yes it's 1.5 times salary. Overtime and bonuses are counted.
There are 3 revenue allowed methods to calculate final salary.
The one that gives the highest amount can be used for your AVCs.
 

Attachments

  • Revenue Final salary calculation methods.pdf
    24.7 KB · Views: 31
Cheers, on DB scheme statement i got today it looked like it was calculating lump sum as 1.5 times salary that excluded bonus and overtime as was only coming to 155k and when i include full uscable salary it would be closer to 250k. The revenue overrides the scheme rules thankfully.

Only for this site i would be lost regards all this.
 
If you have the DB and the DC pot, where is the 1.5 x salary lump sum taken from? Do you just split it between the two however you like? If taken from the DB scheme what is the impact for the regular pension payment?
 
I have the option to take the lump sum from just the DC pot. On my DB statement i get 2 options, no lump sum and full salary per year or option 2 lump sum and reduced salary per year. For 155k lump sum in option 2 it reduced annual salary by 13k. I will have full lump sum from dc pot so wont touch DB pension.
 
@confused87
Don't rely on your AVC provider to calculate the best possible lump sum. Get full details of your total income from your employer. Then check out what gives the best result. Give the pay details for your best peiod to the AVC provider.

The 12 month period for definition 1 does not have to be a calendar year.
 
@confused87 - good luck with your decision-making around the lump sum. I'd be very interested to hear back about what worked best for you and if taking lump sum from DB or DC pot was more beneficial either way
 
Fibbernacci said:
- good luck with your decision-making around the lump sum. I'd be very interested to hear back about what worked best for you and if taking lump sum from DB or DC pot was more beneficial either way
Click to expand...
Ah it's probably 25years away at this stage ha. Just makes sense to me as I will full guaranteed good pension from db scheme and will have full lump sum in dc pot to take from and should have few 100k in ARF from dc pot too. With guaranteed pension it will mean comfortable lifestyle and won't have to be worrying about how my ARF is doing too much.
 
You must log in or register to reply here.
Menu
Log in
Register