Max lump sum calculation

S

SGWidow

Registered User
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My friend will be retiring shortly from the Civil Service.

She's 60 and will have about 20 years full-time equivalent service - she's been a civil servant forever but has only 20 "years" service as she works part-time and took breaks to look after the kids, etc.

If her FT salary is €80k, she will get a pension of €20k and a lump sum of €60. My question is what is her max allowable lump sum. Is it 1.5 x €80k?
 
I think the lump sum would be calculated pro rata, so it would be 1.5x€80k*(20/40) i.e., €60k
 
Hi Skrooge,

The civil service lump sum is definitely as you say.

I'm trying to find out the Revenue Max lump sum.
 
you mean if she had an AVC or something that she contributed to, is she permitted to take say €60,000 as a lump sum, in addition to the €60,000 lump sum she will receive from the Civil Service. Are you asking is the maximum lump sum she is able to avail of 1.5 times her final full time salary of €80,000?
 
i believe it entitles on to 1.5 time their lump sum upto 120k in this case, so she could supplement her tax free lump sum with 25% (upto 60k) of a private pension/AVC.
 

Seems you can calculate it based on the full time salary.

 
Ok - so getting back to the original example, it seems pretty clear that she has scope to fund an additional €60k as a lump sum

She can presumably achieve this by making contributions in respect of 2020, 2021 and 2022

Assuming that she just wants to invest in Cash, whats the cheapest way to implement this?
 
If she has 20 years service, the the Revenue max is 150% of Final Salary. She can fund any shortfall by AVCs through her main scheme using (probably) Cornmarket.
 
Thanks @Conan

Can she use a PRSA-AVC instead of the Cornmarket AVC?

[The charges would be a lot less for what should be a simple bed and breakfast type operation!].
 
SGWidow said:
Thanks @Conan

Can she use a PRSA-AVC instead of the Cornmarket AVC?

[The charges would be a lot less for what should be a simple bed and breakfast type operation!].
Click to expand...
Yes.
But if retiring shortly, she will need to work out how much she can contribute which will be tax deductible.
 
looking at this thread , my wife has been an employee of the HSE since 1999 and due to retire at 65yrs next july and has worked mid week to mid week since starting ie week on week off, although a permanent employee, can she start an AVC to maximise her lump sum or does it have to be 20 years working every week to maximise?
 
Thanks @Conan

I understand. So she pays 35% of her income last year, 40% of her income this year and next (these being the relevant percentages - she never contributed to the "spouse's scheme").

Her husband works so some of her contributions will attract 40% relief and the balance 20%. Even at 20% relief, it's a pretty attractive return (25% less charges) over a year or so.

You have just saved her c. €2k as if she manages to put in €50k in 3 or 4 lump sums, my understanding is that Cornmarket would levy a contribution charge of 4% on any AVCs!!

All along, I was pretty sure that there was a shortfall between what the Rev Max lump sum amount and the lump sum that's provided through her Civil Service pension.

Where I wasn't so sure is whether she could fund this shortfall through a PRSA-AVC rather than being compelled to do an AVC with Cornmarket with the assoicated monopoly-style pricing.

I know that you're an expert in this area so your confirmation that she can achieve her goal of tax effectively enhancing her lump sum via a PRSA-AVC is great news. Thank you.
 
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Just one other question on all of this.

Is it correct to say (or not!) that if a civil servant does an AVC, it must go through Cornmarket whereas if a civil servant does an AVC-PRSA, s/he can go through a number of intermediaries?
 
SGWidow said:
Just one other question on all of this.

Is it correct to say (or not!) that if a civil servant does an AVC, it must go through Cornmarket whereas if a civil servant does an AVC-PRSA, s/he can go through a number of intermediaries?
Click to expand...

You can use any intermediary you want. As far as I know only cornmarket are facilitated with the net pay deduction facility i.e. you will see your tax relief every month. With the others you will have to claim back the tax relief directly from Revenue at year end (though I think they may have updated their systems recently to adjust your credits monthly now. You have to engage with them nonetheless).
 
Thanks @Itchy

Are you saying that there are multiple AVC arrangements for Civil Servants?

That surprises me - I thought that there would be a single AVC arrangement and very many AVC-PRSA arrangements??

Who, apart from Cornmarket, facilitates AVCs for Civil Service employees?
 
SGWidow said:
Thanks @Itchy

Are you saying that there are multiple AVC arrangements for Civil Servants?
Click to expand...

Not clear what you mean here.

SGWidow said:
That surprises me - I thought that there would be a single AVC arrangement and very many AVC-PRSA arrangements??
Click to expand...

Not clear what you mean here. Normally Cornmarket do a deal with Union to set up the net pay arrangement. You don't have to use them, you can select any provider you want (which will be a AVC PRSA).

SGWidow said:
Who, apart from Cornmarket, facilitates AVCs for Civil Service employees?
Click to expand...

I think all the main providers will do an AVC-PRSA: Zurich, Irish Life, Davy etc. With the tax relief arrangements I mentioned above.
 
There are three types of voluntary contributions for civil servants

1. Purchase of notional service
2. AVCs (part of occupational pension scheme legislation)
3. AVC-PRSAs (part of PRSA legislation)

[The point being that AVCs and AVC-PRSAs are subject to different, albeit very similar, legislation]

I'm not interested in notional service.

My question is - are AVCs only available through Cornmarket or not?

Your previous post was that "you can use any intermediary you want"

My question is - are you saying

(a) you can use any intermediary you want for AVCs? (which would be a surprise to me and hence my question which intermediary, apart from Cornmarket, can civil servants do AVCs with)

or

(b) you can you can use any intermediary you want for AVC-PRSAs? (which doesn't surprise me at all)
 
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Ah, I'm saying b. Dept of Finance policy is that there is only one AVC scheme per trade union. Most likely only Cornmarket.
 
So Cornmarket has a monopoly on AVCs for Civil Servants and, for execution only lump sum contributions, they apply a contribution charge of 4%.

Conan (a pensions expert) has confirmed there is no essential difference between AVCs and AVC-PRSAs for the purposes of targeting tax free lump sums (obviously different contracts will have different charging structures/investment returns, etc.). Accordingly, given that one can do an AVC-PRSA on an execution only basis with other providers for a zero contribution charge (and the same management charge of the "Cornmarket" AVC), it seems curious that the unions facilitate such uncompetitive charges by Cornmarket for the main AVC arrangement. Aren't unions meant to act in the best interest of their members? Curious and curiouser!!!!??
 
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