Once off AVC or to do it for a few years.

B

BlackandBlue

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My other half recently took up a CO role.
  • If you remain a CO and retire with 10 years service your annual pension will be around €2,200 and your lump sum will be around €14,000.
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Now they will have more service than that, but not much more.

They were thinking of taking out AVC's based on talk at work.
But I am not sure it is a good idea based on what I have read (mostly here)

We are (and will) remain jointly assessed.
My salary means we will always remain in the higher bracket.

My understanding is that they can use the following 1.5 * final salary/years of service to maximize the potential tax free lump sum.

So any AVC contribution would be at the standard rate.
While any future excess would be taxed at the higher rate.

So to my question
Would it be worth it to contribute for a few years to get the tax benefit?
 
They will be paying tax at the 20% rate so.

If they are planning to retire before age 66, having extra AVCs could be advantageous.

They could use their extra AVCs to buy an ARF.

If they had no earnings other than their small CO pension, they might be able to make some tax free drawdowns from their ARF.

Also if they are short of 2080 Prsi contributions, they could gain extra contributions from an ARF.
 
If they are planning to retire before age 66,
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Currently not expected.
if they had no earnings other than their small CO pension
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Tiny (I mean tiny) pension from a previous employment.
So bar State Pension and Single scheme that's it.

Also if they are short of 2080 Prsi contributions,
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No, bar a short time while child rearing, and redundancy after 2008 for a few years it has been continuous employment.

They could use their extra AVCs to buy an ARF.
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and
they might be able to make some tax free drawdowns from their ARF
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This is where I am curious.
would the following be an option
  1. The difference between the Single scheme and the Max Salary based tax free
  2. and
  3. "Cash out" the balance of the pot at the standard rate hoping for growth in the meantime? e.



Thanks for the answers .
 
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Are they currently earning more than 35k ?

3. They can take AVC benefits in different ways of their choosing.

This includes taking maximum revenue allowed tax free lump sum and cash out the remainder at their marginal tax rate.

1. The maximum they can take tax free from their AVCs is the difference between their employment scheme tax free lump sum and the revenue allowed maximum tax free lump sum.

Having AVCs would be very useful if they did decide to retire before age 66.
 
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