Hi,
I can't find a definite answer to this and would be grateful for your thoughts.
My wife (teacher) is looking at taking Cost Neutral Retirement at age 56 with 21 years service. Let's say her salary is €68,000, she started teaching in 1994 (reduced hours). Her lump sum (actuarially reduced) is €50,000. As she has over 20 years service she can get a tax free lump sum of 1.5 times final salary if she retires @ 60. Can she do a last minute AVC to top up and so by how much? I'm getting two sets of conflicting advice.
Advice 1: As she is taking cost neutral her lump sum entitlement will entitlement will be final salary*1.5*(actual service/potential service). I think potential service assumes normal retirement age of 66. So she should be entitled to 68,000*1.5*21/31= €69,000. So she can do a last minute AVC for €19,000.
Advice 2: As she is taking Cost Neutral she is only entitled to a tax free lump sum of Final Salary *3/80* actual service = 68,000*3/80*21 = €53,550. So she can do a last minute AVC for €3,550.
Do you know which is correct?
Thanks,
Eugene
I can't find a definite answer to this and would be grateful for your thoughts.
My wife (teacher) is looking at taking Cost Neutral Retirement at age 56 with 21 years service. Let's say her salary is €68,000, she started teaching in 1994 (reduced hours). Her lump sum (actuarially reduced) is €50,000. As she has over 20 years service she can get a tax free lump sum of 1.5 times final salary if she retires @ 60. Can she do a last minute AVC to top up and so by how much? I'm getting two sets of conflicting advice.
Advice 1: As she is taking cost neutral her lump sum entitlement will entitlement will be final salary*1.5*(actual service/potential service). I think potential service assumes normal retirement age of 66. So she should be entitled to 68,000*1.5*21/31= €69,000. So she can do a last minute AVC for €19,000.
Advice 2: As she is taking Cost Neutral she is only entitled to a tax free lump sum of Final Salary *3/80* actual service = 68,000*3/80*21 = €53,550. So she can do a last minute AVC for €3,550.
Do you know which is correct?
Thanks,
Eugene