Last min AVC tax relief

[Cityman]

Hey
I'm a public servant..I have a preserved pension (18 years) from previous semi state job that kicks in when I'm 60.
At 60 I'll have 24 years with my PS employer.
So if I retire I can only get 24/40 of my possible tax free lump sum.
I'm debating putting about 40k into a last min AVC.
Obviously the tax relief on that would be more than the tax I pay that year so question is do I still get full tax relief. ie put in 40k..get 40k back with pension and claim 40% back in tax the following year?

Also I assume my preserved semi state pension has no impact on any of the above? (I took my lump sum when I left -I took voluntary severance)

Any thoughts would be most welcome...many thanks

 

[Conan]

With 24 years service (by Normal Retirement Age) your Scheme will typically provide a lump sum of 3x24/80ths of Final Salary, so 72/80ths. But under Revenue rules, once you have at least 20 years service you could get the Revenue max of 120/80ths, ie 150% of Final Salary. This includes any retirement lump sum from any previous scheme.
So if the total lump sum emerging from both schemes is less than 150% of Final Salary, then you could invest AVCs (or “last minute AVC”) to bridge the shortfall. This is very tax efficient since you can get tax relief at up to 40% on contributions and get the full value back tax free (up to €200,000).
However there are limits to the tax relief in any year,
- 35% of Salary between 55 and 59
- 40% of Salary over age 60 (subject to an earnings limit of €115,000)
If you invest €40,000 and it exceeds the 35% or 40% limit in say the year 2019, then any excess can be offset in 2020 (if still in employment). If no longer in employment then you could offset the excess against 2018 (by reopening that years tax returns).
Perhaps you need to check out your particular position with whoever looks after your pension scheme or whoever manages your AVC facility (often Cornmarket for Civil Servants).

 

[Cityman]

With 24 years service (by Normal Retirement Age) your Scheme will typically provide a lump sum of 3x24/80ths of Final Salary, so 72/80ths. But under Revenue rules, once you have at least 20 years service you could get the Revenue max of 120/80ths, ie 150% of Final Salary. This includes any retirement lump sum from any previous scheme.
So if the total lump sum emerging from both schemes is less than 150% of Final Salary, then you could invest AVCs (or “last minute AVC”) to bridge the shortfall. This is very tax efficient since you can get tax relief at up to 40% on contributions and get the full value back tax free (up to €200,000).
However there are limits to the tax relief in any year,
- 35% of Salary between 55 and 59
- 40% of Salary over age 60 (subject to an earnings limit of €115,000)
If you invest €40,000 and it exceeds the 35% or 40% limit in say the year 2019, then any excess can be offset in 2020 (if still in employment). If no longer in employment then you could offset the excess against 2018 (by reopening that years tax returns).
Perhaps you need to check out your particular position with whoever looks after your pension scheme or whoever manages your AVC facility (often Cornmarket for Civil Servants).

Many thanks for reply.
I have researched further following your reply and think I'm sorted as I took voluntary severance in April 2005 and availed of my lump sum at that time..I didn't know about the tax relief limits per year but good to see I can set against another years tax.
Thanks Again.