Suppose the salary was 60k. 1.5 times of this is 90k assuming full service. Can an AVC be used to fund the difference between 90k and 200k.
Tax-free lump sum: the maximum tax-free lump sum that can be taken on retirement is 25% of the value of the fund in the year of payment. This is subject to a lifetime limit of €200,000. Any excess pension lump sum over €200,000 will be subject to income tax with the next €300,000 taxed at 20% and the balance taxed at 48% (40% income tax and 8% USC). If you are a member of an occupational pension scheme, you can take a tax-free lump sum based on your salary and service with the employer up to a maximum of 1.5 times your salary (subject to the overall maximum of €200,000).
Tax
Tax on lump sums at retirement
The first €200,000 of pension lump sums payable is currently (2016) tax free. This is a total lifetime limit even if lump sums are taken at different times and from different pension arrangements. Lump sums between €200,001 and €500,000 are taxed at 20%, with any balance over this amount taxed at your marginal rate and subject to the Universal Social Charge.
The amount of cash you can take out of a pension arrangement is limited, with different rules applying depending on the type of arrangement you have.
For RACs, PRSAs and people transferring to AMRF/ARFs at retirement, the cash limit is 25% of the retirement fund.
The amount of cash you can get from an occupational pension scheme at normal retirement age is broadly 1.5 times your Final Remuneration, if you have completed 20 years’ service and have no benefits from a previous scheme
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