Chargeable Excess Tax calculations

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lawoman

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How is the Chargeable Excess Tax calculated in the following scenario ? :

Pre 1995 Public Servant . 40 years service retiring at 60 . Final salary € 70 k . Single male .
PRSA AVC of € 600 k .

Thanks in advance .
 
Capitalisation factor is 24.4 , if I'm reading it correctly .
So its € 35,000 multiplied by 24.4 = € 854,000
Plus € 600 k
= € 1,454,000 .
Which is well under the SFT .

So why would pension provider be saying that PRSA AVC is overfunded ?
 
Might this thread be relevant here?

Is it possible to "over-fund" a PRSA-AVC?

I was wondering if anyone knows whether it is possible to "over-fund" a PRSA-AVC? I've come across this term, but was wondering if this risk can be mitigated or avoided. I'm not talking about over-funding beyond the standard fund threshold, or above the annual contribution limits. I'm talking...
www.askaboutmoney.com
 
Thanks all for replies .
Going by chapter 5 , the maximum benefit deriving from the PRSA AVC based on my opening post would be € 177,550 .

What happens the balance of € 422,447 ( € 600k - € 177,550 ) ?
Taxed at 40 per cent plus USC ?

Can the PRSA AVC be encashed in full and tax paid to avoid impacting on PS lump sum ?
 
Max pension is €46,666. Pension is €35k, so the AVC can provide a pension of €11,665. AVC fund is €600k, so an annuity quote for 1.6% would be needed to demonstrate that it isn't over funded.
 
Chapter 5 of the Revenue Pensions Manual:


"Monies should not be built up in a tax-exempt pension fund if they cannot be used for the purposes of providing relevant benefits."

The answer here may be to purchase the most expensive annuity possible with full indexation and a 10 year guarantee

A single life annuity for a 60 year old indexed at 5%pa is around 2.6% starting rate.

This is a perfectly rational decision for a 60 year old single retiree
 
Last edited:
lawoman said:
why would pension provider be saying that PRSA AVC is overfunded ?
Click to expand...

They may be saying you are overfunded as your Scheme benefits alone could be already at the Revenue maximum.

Revenue maximum is a pension of 2/3rds of final remuneration* (€46,666).

Your Scheme is providing benefits of:

1. Annual pension of 50% = €35,000, and

2. Lump Sum of 150% = €105,000 (pension equivalent = €105k/9 = €11,666)

* some digging into your pay records could be warranted to get this as high as possible.
 
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