Overpaying AVCs beyond age related tax relief bands

M

meadow

Registered User
Messages
74
Hi
I recently turned 55 and upped my AVC pension contributions to 35% to avail of max tax relief for this age band. I pay tax at the higher rate,

I noticed in my payslip that the AVC deductions are split into 2 parts

5% which is my employee matching contribution and 35% which is my AVC contribution.

So I am actually contributing 40% in total instead of 35%. This is likely an error on HRs part when I submitted the request

I can probably afford it, so I might just leave it as is, but is there any disadvantages to paying the additional 5% if I am not getting any tax relief on it ?

Thanks
 
Common misconception.

Employer contributions don’t count towards your allowance and in fact from this year employers can make unlimited contributions.

It is possible to deliberately “overfund” a PRSA AVC in which case any unused tax relief in one year is carried forward Indefinitely to future tax years
 
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Thanks Marc
But the 5% is my employee contribution not employer contribution

So I pay 5% and my employer pays another 6%

So in total I pay 40% and employer pays 6%

Does that make any difference ?
 
meadow said:
Thanks Marc
But the 5% is my employee contribution not employer contribution

So I pay 5% and my employer pays another 6%

So in total I pay 40% and employer pays 6%

Does that make any difference ?
Click to expand...
Ok then yes you are paying 40% instead of the 35% but as noted above the excess contribution can be set against future years.

The only thing to watch out for is that in an overfunded occupational scheme any overfund goes back to the employer, but based on salary and service most people are unlikely to overfund their occupational pension
 
Thanks Marc
When you say the excess contribution can be set against future years what does that mean in practice ? Do you mean if in the future I drop my AVC contributions down to 30% I could then get tax relief on the 5% extra I'm paying now ? How would this be done ? Through a tax return ? or do you mean something else.

With regards to overfunding and overfunding going back to the employer, I am on a DC pension only not DB. When you say "occupational scheme" , does this mean DB ?

Thanks
 
Marc said:
Common misconception.

Employer contributions don’t count towards your allowance and in fact from this year employers can make unlimited contributions.
Click to expand...
Is this new?
When I was in employment a couple of years back and my employer contributed to my PRSA that contribution did count towards my age related maximum tax relief limit.
 
I just research that because I was surprised. PRSA are treated differently.
I actually didn't know that and now I am kicking myself.
 
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Prior to the changes introduced this year (which allow unlimited Employer contributions to a PRSA), the Employee and Employer contribution were aggregated for the 15%/20%/25%/30%/35%/40% limit.
This was different to the rules which applied to Executive or Occupational Pensions where the above limits only applied to the Employee contribution (for tax relief purposes).
 
Thanks @Conan.
Do we know that the original poster's pension is an executive or occupational scheme?
Or does it matter under the new rules?
 
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