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

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DualPublicPriva

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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 about whether you can have too much in a PRSA-AVC at drawdown, if it is linked to your occupational pension? Or is it possible to max out your Revenue pension income limits (i.e. 2/3 of final salary), and then transfer the surplus PRSA-AVC pension pot to an ARF?
 
The Revenue Pension manual states: "In any case where a valuation discloses a surplus in excess of 10% of the value of the fund assets, the matter should be brought to the attention of Pensions Branch, Large Cases – High Wealth Individuals Division. Cases will be reviewed on an individual basis. It is important to prohibit the build-up of monies in a tax-exempt fund that could not be used for the purposes of providing relevant benefits. Normally, a scheme surplus should be dealt with by augmenting benefits within approvable limits or by reducing or suspending contributions to the scheme. In exceptional cases, part of the surplus might have to be refunded to the employer and taxed as a trading receipt."

I am wondering does this mean that there is a risk of having to hand over your surplus AVC (or PRSA-AVC?) to your employer at drawdown if you are over-funded? Or can you transfer a surplus to an ARF to avoid this scenario?
 
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I work for the HSE, and I am weighing up whether or not to set up an AVC-PRSA. I would like maximum flexibility at drawdown, and I would like the AVC/PRSA to have as little link as possible to the HSE pension. I am also self-employed part-time separately, and I already have a private PRSA with that employment.

I wonder could I change the status of an AVC-PRSA to a stand-alone PRSA just before drawdown through the following method as suggested in this Irish Life info sheet on AVC-PRSAs published in April 2019 which states:

"Usually you have to take your AVC benefits at the same time as the benefits from your main scheme. An exception to this is where you have been using a PRSA for your AVCs but your last contribution before you retired was an ordinary contribution (for example, as a self-employed person). Then your PRSA benefits will not be linked to your main scheme and you do not have to take them at the same time. In either event you may be able to take part of your fund as a retirement lump sum. You can either leave the rest of the fund invested or use it to buy an annuity (that is a guaranteed income for life)."

Or could I even put AVCs into my existing private PRSA?
 
I've been having the same thoughts lately. As a late public sector entrant I would like to make AVCs. I can pay in to an employer linked (HSE) AVC scheme or go the AVC PRSA route. Either way I would be limited by how much that pension fund can grow based on my salary and the benefits I am entitled to under my occupational pension scheme and also having to retire the AVC PRSA when I retire from my PS employment. So the AVC PRSA route limits my options.

Can PS workers just use income from their PS employment to make AVCs in to a PRSA instead and not have those AVC PRSA limits?

That rule about making an AVC from self employed income decoupling an ?AVC PRSA from your PS scheme is interesting.
 
If you are married you have scope for AVCs running into hundreds of thousands of euro without overfunding. Even single people have scope based on the fact that they could marry later in life.

Check this thread. This was written for pre 95 public sector workers but applies to most workers.

AVC information for pre 95 Public Sector employees.

Can these employees make AVCs ? Yes. They can make AVCs based on non pensionable wage payments and to make up for any shortfall if they don't have the full 40 years service at retirement age. They can also make AVCs to fund for the revenue allowed 100% surviving spouses pension. The public...
www.askaboutmoney.com
 
DualPublicPriva said:
I am also self-employed part-time separately, and I already have a private PRSA with that employment.
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You must max out your contributions to the employer paid scheme before you can make contributions in relation to your self employed income.

And yes, you can be overfunded for your work related pension. You are allowed to have a pension of 2/3 final salary. If your pension is valued at over that (funding checks are always carried out), the excess is refunded back to you.

You cannot change a PRSA AVC plan to a PRSA.

You cannot put your HSE related contribution into an ordinary PRSA. You may have the tax relief claim on it rejected by the Revenue. And don't think they don't check, they do.

Steven
 
So that means that the Irish Life brochure was incorrect to say that an AVC-PRSA is automatically changed to a PRSA if the final contribution is from self-employment?

Figuring out the maximum savings allowed in an AVC-PRSA seems impossibly complicated. Would Cornmarket or other brokers be able to calculate this figure?
 
Steven Barrett said:
You are allowed to have a pension of 2/3 final salary.
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This is correct.

But many occupational pensions provide a pension 50% of final salary and 1.5 times final salary as a tax free lump sum. They also might only provide a surviving partners pension of 50% of the deceased persons pension. The revenue allowablbe maximum is 100% deceased persons pension.

Because of this, many people have scope for very large AVCs.


The worker in this revenue example with 50% pension and 150% lump sum, has scope for AVCs of 357k


 
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DualPublicPriva said:
Figuring out the maximum savings allowed in an AVC-PRSA seems impossibly complicated. Would Cornmarket or other brokers be able to calculate this figure?
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@DualPublicPriva
If you are in the Single Pension Scheme then recommend taking a look at the Key Post thread in the Public Sector Pensions forum by @Ent319. Specifically section 6.3 in Post #3 with follow up detail provided in posts: 31-34.

In there it explains how to calculate the max amount of savings you can have in an AVC (or AVC-PRSA) fund.

It depends on your age at retirement, the amount of HSE pension benefits you have already built up and the amount you can yet build up if you keep working. The calculation even includes the current annual value of the max contributory state pension if taken at age 66. There is no way to know the answer exactly because the max amount you can have in an AVC fund increases as your salary increases and is different if you are married or single.
 
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