Is it sensible (and legal) to fund a 2024 AVC via a short-term loan?

Hi all,

I’m considering making a lump sum Additional Voluntary Contribution (AVC) for the 2024 tax year, and wanted to sanity-check both the logic and the legality of my approach.

• I’m planning to take out a €10,000 personal loan before October 31st 2025 in order to make the AVC payment before the backdating deadline for 2024.
• This would keep me within my allowable tax relief ceiling based on age and income (I’m in my 50's and well within the 35% revenue threshold).
• My intention is to claim the tax rebate in January 2026 and use that refund to pay off the bulk of the loan. Any remaining balance would be paid shortly after from savings or salary.
• The rationale is that the long-term pension growth over the next 10+ years will far outweigh the short-term cost of interest (even factoring in a modest loan APR of 8 - 10%).

Has anyone done something similar?

I have three key questions:

1. Is this approach legitimate in the eyes of Revenue? I’ve heard comments about anti-money laundering or fraud risks if a loan is used to fund an AVC, even if the repayment is quick and transparent.
2. Are there specific reporting requirements or audit risks associated with this kind of lump sum AVC funded by a loan?
3. From a financial planning point of view, is there anything I might be overlooking in terms of opportunity cost, risk, or repayment assumptions?

Appreciate any informed views, especially from those with experience in AVC strategies or Revenue audits.

Thanks!

Would the tax refund not come in Nov 2025?

JohnnyNumeric said:

I’ve heard comments about anti-money laundering or fraud risks if a loan is used to fund an AVC, even if the repayment is quick and transparent.

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There is very little money laundering risk to the lender here and you are unlikely to raise flags. If you do raise flags it should not be an issue as you are not laundering money!


I have no idea of the rest of the plan.

JohnnyNumeric said:

My intention is to claim the tax rebate in January 2026

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The tax refund will come when you add the AVC to your 2024 tax return. As soon as you get the loan, you can make the AVC payment, and claim the relief on it immediately. No need to wait until January 2026.

JohnnyNumeric said:

and use that refund to pay off the bulk of the loan

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The tax relief is at your marginal rate of income tax so you would only get €2,000 to €4,000 back and will still have the majority of the loan to repay.

JohnnyNumeric said:

Any remaining balance would be paid shortly after from savings or salary.

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If you intend to use your savings then why not use them now and only borrow the extra amount needed to bring you to €10,000?

JohnnyNumeric said:

I’m in my 50's and well within the 35% revenue threshold

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Earlier 50s or late 50s? The threshold is 30% if you are 50-54.

JohnnyNumeric said:

From a financial planning point of view, is there anything I might be overlooking in terms of opportunity cost, risk, or repayment assumptions?

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Can you be sure you can pay of the loan and then some within the next year, so that you can start funding pension from salary? Funding it from debt obviously reduces your potential for net growth overall.

How will you feel if you put €10k of a loan into your pension and the markets do that thing (presuming you're in something tied to equities) where they take a big dip for an unknown period of time?

If you need to borrow the entire sum, this would suggest you have little or no readily available funds. In such a scenario, borrowing to fund an illiquid investment may not be the wisest course of action in the short term.

Technically I believe the money needs to come from your employment.

If you can afford to save to pay it back why not just up your contributions to something you can afford.

Are you likely to hit the cap this year?

It doesn't matter where you get the money, loan or winnings etc.

I often got loans from family members to cover the tax rebatable amount. Timed well this could be returned within a few weeks.

It's basically money shuffling.

JohnnyNumeric said:

The rationale is that the long-term pension growth over the next 10+ years will far outweigh the short-term cost of interest (even factoring in a modest loan APR of 8 - 10%).

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Is the rationale more likely that the employee tax relief is use-it-or-lose-it and you currently have a cashflow problem?

You'd like to make a contribution before the upcoming pay-and-file deadline, but you're skint, or at least you have some funds available but are short €10k to fund the full 35% limit.

Your bank is giving you a loan. You're not repaying the loan by lodging cash from the proceeds of crime so there's no placement, layering and integration going on (in the anti-money laundering jargon).

You'll repay some of the loan with the tax refund and then tightening your belt over the next few months as your net salary will be used to repay the balance of the loan rather than be spent or saved.

faketales said:

Technically I believe the money needs to come from your employment.

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No. You need earned income against which to claim tax relief on a pension contribution. How you fund the actual pension contribution from a cashflow perspective is irrelevant. @JohnnyNumeric does need to be still in the same employment in order to make a backdated Scheme/Master Trust AVC or PRSA AVC contribution.

From a financial planning perspective, ideally you'd have the cash available to make the contribution, but perhaps you had some home improvement works or kids college fees to pay, or just cottoned on to pension funding.

The only other thing I could think of is that you may be calculating the 35% on a larger salary than the €115,000 earnings limit, so coming up with a large contribution amount. I presume you are calculating 35% on a lower earnings figure.

Repay the loan as fast as you can.

@Conan says you can't borrow for AVCs (last post in above thread) - I understand that pensions is his game?

A bit of creative thinking is required.

You borrow money for general living expenses and any funds freed up can be used for the AVCs.

If it's a "use it or lose it" situation then I can see the logic.

If you really wanted to be smart you might be able to do it at 0% interest by using a credit card introductory offer(s).

However, personally I would just make AVCs next year.

It keeps you flexible/out of debt and you also get the benefit of dollar cost averaging.

Calico said:

you also get the benefit of dollar cost averaging.

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Or miss out on the incredible value of August 2025!

Time in the market beats timing in the market.

I was gonna get an Avant card at 0% to fund my Class 3 contributions but then a parent decided to loan me the cash and I'm paying them back over a year or so. Not sure if Avant are still doing that.

If you have a short payback time frame it's a no brainer. You could even run the math by the large language model that shall not be named.

Fibbernacci said:

Not sure if Avant are still doing that.

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6 months 0% interest on transferred balances here:
But, as @T McGibney suggested earlier, perhaps such a strategy may not be the most suitable for some people...

JohnnyNumeric said:

This would keep me within my allowable tax relief ceiling based on age and income (I’m in my 50's and well within the 35% revenue threshold).

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Do you have a specific investment in mind or just general investment fund? Are you planning to maximise your allowable tax relief in the years that you will be paying off this loan? Otherwise, what's the point? Maybe if it was a Last Minute AVC.

Say you will be paying off the loan over two or three years, your question is really, do I invest a lump sum now or make regular investments (i.e. use the potential loan payments to invest). That's a timing the market question.

AAAContributor said:

No. You need earned income against which to claim tax relief on a pension contribution. How you fund the actual pension contribution from a cashflow perspective is irrelevant.

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My AVC form asked me "Please tick the box to confirm the source of funds for this AVC derives from employment from which the Plan named in “Your Details” section above relates."

Now one euro is the same as another so if I spent my income and use my savings its really all the one but a loan is a little different.

Thanks everyone for the thoughtful responses - I really appreciate the range of perspectives.

To clarify a few points raised:

• Yes, I joined my current employer mid-2024, so I had no pension contributions earlier in the year. This gives me unused headroom for an AVC contribution for the 2024 tax year.
• I’m in my late 50s, so the 35% tax relief limit applies, and I’ve already reached that limit through payroll contributions in 2025. That means this 2024 AVC is a once-off opportunity - I won’t have this kind of headroom again.
• The €10k AVC contribution would be made before the October 2025 pay-and-file deadline, and I’d claim the relief through my 2024 Form 12 in early January (or is this rebate in Nov 2025 as one poster suggested?)
• I do have some savings, but would need to borrow the rest (roughly €8-10k) to hit the desired AVC amount. The loan would be cleared early in 2026 using the tax refund and my salary.
• I’m fully aware of market risk (thanks to those who raised it), but I’m comfortable with a long-term investment horizon. I’m not trying to time the market - just take advantage of tax relief I’d otherwise lose.

A few specific replies:

• On legitimacy: It looks like the consensus is that funding the AVC via a loan doesn’t breach Revenue rules as long as the contribution is genuine and linked to earned income. The cashflow source (loan, savings, or salary) doesn’t impact eligibility for relief.
• On audit or AML concerns: Helpful to hear that this is extremely unlikely to trigger flags, especially with a clean financial record and proper documentation.
• On opportunity cost: This is a fair consideration, but in my case the combination of tax efficiency, time horizon, and lack of other pensionable income in 2024 makes this a logical move.

Thanks again to everyone who contributed - especially those who shared their own experiences. Some great points raised.

@JohnnyNumeric
You must make your AVC contribution and submit your form 12 for tax year 2024 before the tax return deadline. For online tax returns this is 13th November 2025.

If you do your tax return for 2024 beyond this date you will miss the opportunity to get the extra 10k AVCs tax relieved for 2024.

Aim to make the AVC payment in October in order to get the payment certificate back from the provider before the deadline.

You will get your tax rebate very soon after you submit your return. Probably within a week or two.

faketales said:

"Please tick the box to confirm the source of funds for this AVC derives from employment from which the Plan named in “Your Details” section above relates."

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"derives" is the key word here.

The OP is making a pension contribution ("source of funds for this AVC"), that is based on their earnings from that employment ("derives from employment from which the Plan named in “Your Details” section above relates").

The OP is making a pension contribution to the Scheme based on the earnings from the employment to which the Scheme relates. The OP is not making an AVC based on any other earnings or employment.