DB, tax free lumpsum, what happens if I lose car and bonus in years before retire?

[peno]

Re: DB, tax free lumpsum, what happens if I lose car and bonus in years before retire

You should also possibly consider making AVCs to fund early retirement if you wished.

My advise is to contact your pensions administer ansd see if they will offer to provide an actuarial projection of your avc. Which can estimate the required AVC to fund rev max benefits at a range of ages before NRA.

Some companies offer this others may not due to the cost.

 

[upport]

Re: DB, tax free lumpsum, what happens if I loose car and bounus in years before retire?

Please read the thread upport.

If that does not answer your question - then please specify in more detail what your question is.

Sorry that my question was'nt clear........if an employee in the private sector with 40 yrs service qualifies for max DB at 65,will his avc fund be paid to him or does he lose the avc fund because he has attained max defined benefit?

 

[Guest126]

It would usually be taxed as income in year of retirement.

If blatant overfunding may be further penalised, often it is possible to find legitimate ways of using AVCs to make sure not overfunding.

 

[Homer]

Re: DB, tax free lumpsum, what happens if I loose car and bounus in years before reti

I am considering making AVC contributions for 2 or 3 years and stopping making contributions until I am 7 years from retirement. At that stage I will have more certainty as to my final remuneration will be in terms of calculating revenue limits.

Any commnets.

Just to clarify earlier responses, please note that the Revenue will allow you to average remuneration over any period of three years or longer ending not more than ten years prior to your date of retirement.

This means that you could take your earnings from age 52 to age 55 if you were retiring at age 65. It also means that, if your BIK etc, were to stop at (say) age 53, you could take the average from age 50 to age 55. While this would not protect you fully from the impact of the loss of BIK, etc. it would at least let you take 60% of the figure (i.e. three years BIK spread over five years averaging) into account.

Please also note that remuneration over any period ending prior to your date of retirement can be "dynamised" i.e. increased in line with inflation from the end of the year to your date of retirement, so you may have more scope than you think.

Regarding what happens if you are overfunded at your date of retirement, in theory the Revenue could insist that the excess funds are absorbed into the scheme and effectively become used by the Trustees to defray costs or provide benefits for other employees. However, in practice, Revenue will generally allow the excess to be refunded to the member through payroll (and hence subject to both marginal rate income tax and PRSI) on a case by case basis, although they could refuse to allow permission to permit such a refund if they were to judge that there had been a case of deliberate overfunding by the member.

Homer

 

[aidan119]

REMUNERATION

(Extract from Revenue Pensions Manual​

Final Remuneration
This may be computed on one of the following bases, viz:

(I) (a) Basic remuneration over any twelve month period of the five years preceeding the
relevant date (i.e. the date of retirement, leaving service or death as the case may be).

PLUS

(b) the average of any fluctuating emoluments over three or more consecutive years
ending on the last day used in (a) above.

(ii) The average of the total emoluments for any three or more consecutive years ending not
earlier than 10 years before the relevant date.

(iii) The rate of basic pay at the relevant date or at any date within the year ending on that date within the year ending on that date plus the average of any fluctuating emoluments calculated
as in (i) above.

Provided that

(i) Basis (iii) cannot be used where within three years before the relevant date an employee

(a) was promoted or received a special increase in basic pay.

(b) the total increase over the relevant three year period is greater than it would have been if the remuneration on the day of commencement of the period had been increased proportionately to the increase in the Consumer Price Index, or to increase applicable to the employment under a National Wage Agreement, during the same three year period.

However, it is possible to agree beforehand with RBD that such increases if given on a recognised scale applicable to defined groups of arms-length employees will not prevent the availability of basis (iii).

(ii) Whenever final remuneration is calculated by reference to a year or years other than the 12 month ending with the relevant date each such year’s remuneration may be increased in proportion to the increase in the cost of living from the last day of that year up to the relevant date referred to as “dynamised” final remuneration. This also applies to fluctuating emoluments so that fluctuating emoluments of a year other than the twelve months ending with the relevant date may be increased as detailed above.

(iii) In the case of a 20% “director-

(a) the scheme may not adopt either of the bases (I) or (iii) and

(b) Proviso (ii) above may not be applied unless it can be shown to the satisfaction of
RBD that the amount of the non-commutable pension payable or remaining payable or payable before the application of rules permitting commutation of the whole of the benefits to the directors not less than two-thirds of the annuity equivalent of all retirement benefits payable to the director (or to which he is entitled) under all schemes of the Employer at the time any lump sum benefits are paid to him under the rules.