pre 2004 - AVC to replace State Pension without Overfunding

O

Olunix

New Member
Messages
5
Hi

I'm a pre-2004 PRSI Class A public servant and will have 40 years service when I'm 64.

I have seen in other threads on this forum that in this particular situation I can contribute to an AVC up to an amount that is equal to the state pension without overfunding. This has been outlined well with some great commentary by @Early Riser @Conan and @Gordon Gekko etc. (Thanks!)

But can someone point me to a place where this anomaly is documented - or any references that I can rely on? For my own piece of mind and to show pension trustees etc that this is allowed.
 
The Revenue max occupatilnal pension is 2/3rds Final Salary (before taking any lump sum). Since you are an A Class PRSI contributor, your occupational pension will (presumably) will be 2/3rds less the State Pension. Therefore you potentially gave scope to fund AVCs to the equivalent of bridging the gap.
If you want documentary proof, it's in the Revenue Pensions Manual.
 
Correct, but the lump sum will be in addition. So the equivalent of 2/3rds less the State Pension.
So plenty of scope for AVCs
 
So that 1 ÷ 80 x years work x salary for pension (joined public service in 2000) stands alone and at 66/67 the state pension is added or is state pension amount deducted from occupational pension until 66/67 , l hope it is the former..... god there is real need to simplify this for people...
 
Thanks for the referral to the Pensions Manual. I didn't know it existed! Looking at Chapter 5 - example 3 is pretty similar to my own situation. If I change the capitalisation factors appropriately to account for age 64 the following is the result.

SalaryBenefitPensionCapitalisation Factor Value of Benefits
Revenue Max Benefits90,00066.60%60,00029.21,752,000
Scheme Benefits90,00050%45,000251,125,000
Gratuity Lump Sum135,000
Max Benefit Funded By AVCs492,000

But then do I add it the state contributory pension phenomenon as well to this? ie annuity sum in place of state pension for integrated scheme of e13,000/.035= e370,000

So does that mean that 492,000 + 370,000 = 862,000 can be funded by AVCs?
 
Public sector pensions usually only allow for half of your pension to be paid to spouse and children if you die. You can make AVC's to fund for a pension of 100% the value of your pension for widows and orphans, as this is allowed by Revenue. This allows scope for a large amount of AVC's. If you do not die before reaching pension age you can then use these extra AVC's to set up an ARF.
 
your AVC provider should be ensuring that you dont overfund your AVC. They do a similar calc as outlined above in pension manual.

Your pension is integrated for the state pension based on a pensionable salary with a reduced pension on death. Revenue max is 2/3rd's final salary with all the add ons. With annuity rates the way they are it is highly unlikely that you could overfund your AVC pot.
 
You must log in or register to reply here.
Back
Top