Phil_space
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Just seeing this now, Phil. My wife has a private PRSA with Zurich to make up a shortfall in service at retirement. I, on the other hand, will have 40 years + but, to my surprise, I could take out a 'last minute AVC' with Cornmarket to maximise lump sum. Otherwise, I wouldn't be interested in them. I will report back if I find out much more. Conan's post above sums it up well.All,
Thanks everyone for your advice. TBH I am dubious about the AVC scheme as it's presented by Cornmarket but feel I'm potentially missing out on some tax benefits. However, the last-minute AVC option looks a good one to make up the lump sum differential. Slim if you have any conversations with Cornmarket in this regard, perhaps you could let us know.
Cheers,
Phil
To both Marion & Gordon..with full service and entitlement, it only makes sense because of paycuts over the last few years. Max retirement lump sum and pension would have been higher but for the cuts. You can use the avc to make up the difference.
If she is a public servant, her pay will have been cut twice in the last 5 years. Therefore, her lump sum and pension will be somewhat less than they would have been had there been no cuts. Revenue allows the retiree to take into account the higher amounts and supplement them with the AVC. I can't answer about the ARF although l suspect once the lump sum is extracted, the ARF is formed for the balance.Thanks Slim. Sorry, but I'm still not clear.
If someone is on €100k pa, has been for 40 years, and she retires, I'm clear that she gets €150k tax free and €50k pa.
If separately, she has been making AVCs, do all of the AVCs go into an ARF?
Thanks.
OK, gotcha! I suppose an AVC will offer options for early retirement, maximise tax relief and allow them to top up their pensions.Thanks. I'm projecting into the future, at which time the salary cuts will have dropped off the radar. Her husband is maxing out his AVCs (private sector) and together they have capacity to fund AVCs for her also. The issue is whether they should.
I'm confused by this. Say you retire pre 1995 public servant with 40 years at 100K you get the 150K tax free lump sum. You also have 20K in an AVC.
Revenue website tells me the first 200K is tax free.
As and from 1 January 2011, the maximum tax-free amount of a retirement
lump sums is €200,000. This tax-free amount is a lifetime limit and
encompasses all retirement lump sums paid to an individual on or after 7
December 2005.
So should you not get all of your 170K lumps sums from the two schemes completely tax free?
"Max ever allowed in this situation is 15/80th gratuity extra". Does this mean the max using this example would be 15/80 x €150,000 = €28,125?Thank you Slim.
I have found this document online this and it seems that they can also use the additional 3 years worked to enhance their lump sum.
http://www.ahcps.ie/_fileupload/How to maximise your tax free cash at retirement.pdf
Scenario 3)
• Public sector employee with 43 years at age 65 has scope to fund for additional tax free cash. (Salary of €100,000).
BEFORE RETIREMENT
Actual gratuity €150,000
From superannuation scheme
(40/80th x 3 x €100,000)
Revenue Limits
(43/80th x 3 x €100,000) €161,250
Scope for last minute AVC: € 11,250.
Max ever allowed in this situation is 15/80th gratuity extra.
TAX RELIEF
IN ADDITION: The employee can then submit a tax return form to Revenue for €11,250 (assuming tax at the higher rate of 41% and PRSI at 4.9%) and can get a cheque back for €5,163. In other words, as well as maximising his/her tax free cash, the employee would make a saving of 45.9% i.e. €5,163) on the amount invested in the AVC as full tax relief is allowed by the Revenue.
The real cost to fund €11,250 is €6,340
Marion
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