Public sector post-2012 pension & AVCs /PRSAs - help!

S

SeaSwimmer

Registered User
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Hello all,
I'm 37 and due to many years living abroad in my 20s & 30s, I won't be eligible for a full state pension....

I had a fixed term contract public sector job with single scheme pension payments for 2.5 years that ended earlier this year, and I'm very fortunate to be starting a permanent contract with the same public sector org again at the end of this year, starting salary at around 70K.

I contacted the pensions section of the public sector org, and they told me they don't have an AVC Scheme...which I think is strange.

I'm looking to max out my 20% tax free pension contribution from my 2019 public sector salary before the end of October... As I'm currently not employed with the public sector, so I'm a bit confused as to what I can do.

Do I/ can I.. set up a separate private PRSA with the tax efficient allowance I have left from 2019?

On lots of broker/ pension company websites they talk about AVC PRSAs that have to be tied to your public sector pension if you are employed by public sector. But it seems like my public sector org doesn't have the AVC option...

If I set up a private PRSA now before I am re-employed by public sector, can I keep it separate?

As I'm on the single scheme pension, and if I stay the next 30 years with this employer, it looks like the pension is quite low, estimated at 17k pa, based on single scheme calculator.

I'm guessing that the return on dumping more cash into a public sector AVC (even if I can do this) on the single scheme is poor, and that a separate private PRSI could be better, and also offers me flexibility if I leave my job in the future?

Thanks so much for your thoughts!
 
You are free to start an PRSA-AVC as far as I know, even as a member of the Single PS scheme.

If you set up a PRSA-AVC, it can be nothing to do with your employer.
 
SeaSwimmer said:
I'm looking to max out my 20% tax free pension contribution from my 2019 public sector salary before the end of October... As I'm currently not employed with the public sector, so I'm a bit confused as to what I can do.
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If you are no longer in that employment you can’t now make a pension contribution to reduce your 2019 liability. That contribution would have needed to have been made before you left that employment / your contract ceased.
 
SeaSwimmer said:
I'm guessing that the return on dumping more cash into a public sector AVC (even if I can do this) on the single scheme is poor, and that a separate private PRSI could be better, and also offers me flexibility if I leave my job in the future?
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There is essentially no such think as a public sector AVC. The funds involved are all private sector. However, public sector employers generally have an arrangement with a private sector brokerage to provide AVCs to staff if they want to avail of it (very unusual that yours doesn't). This makes it handy in that contributions come directly from from your wages with tax deducted. However, it is otherwise no different to setting up a PRSA-AVC yourself. Indeed, you may get a better deal regarding fees and charges by going this way.

Just to be aware, though, that whatever type of AVC you set up, it is directly linked to your Single Scheme pension. If you leave your job for the private sector at some future date, then your AVC fund will be effectively beyond reach until you are drawing down your Single Scheme pension (68, presumably). You will need to fund your pension in the private sector seperately.
 
thanks for this feedback - still confused! :)

@Protocol : says I can set up a PRSA AVC that is separate to my single scheme pension... but

@Early Riser : You disagree and say that if I set up my own PRSA AVC, it will be linked to the single scheme anyway?
At the moment, today, I am not employed by the public sector. I left the public sector in January, and my new public sector job only starts in December. So is it possible if I set up my PRSA AVC (or use my tax free allowance for some other pension plan) now ( before my public sector contract starts), and that then it will stay separate even when I join the public sector again in December?

@Smoneen: you say I can not even set this up now for 2019 as I am not in that job anymore.. that seems really unfair that I can't reap the tax benefits still.. do you have a link to any website where this is clearly stated?

thanks so much for this info!
 
When I say separate, I mean not organised by employer, or not sold by broker or pension firm linked to employer.

Sorry.

The PRSA AVC will be linked to that occupation, to that job.
 
SeaSwimmer said:
You disagree and say that if I set up my own PRSA AVC, it will be linked to the single scheme anyway?
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I am not disagreeing. To set up the PRSA-AVC you shop around and find a broker to set up the AVC. Your employer does not have to know anything about this (and I doubt they would be interested). You pay your contributions via your bank account and arrange with Revenue to adjust your taxes accordingly. However, the scheme benefits are linked to the Single Scheme. You cannot draw down the benefits until you are drawing down the Single Scheme benefits. Or, should you take cost-neutral early retirement from the Single Scheme you have to take the benefits accrued through the AVC as well. You cannot transfer this PRSA-AVC to another employment in the private sector. However, you could transfer it if moving within the public service and remaining a Single Scheme member.

I don't know about setting it up now to take advantage of 2019 tax breaks. But what Smoneen says makes sense - given that you are not currently employed. As it seems like you are going to shop around for an AVC provider you might pose this question to some of them on the telephone. If it is possible, it would have to be done by the end of October.
 
I’m not 100% sure if there is anything in the TCA that categorically states this. There’s nothing obvious in S.787 that’s jumping out at me but I’ll do some digging for you.

Yes it’s somewhat unfair but it’s also potentially a substantial relief from Revenue’s perspective. It also affects self employed individuals who cross over to other PAYE employment and vice versa, where they do not make the contribution prior to the relevant trade or employment ceasing. I’ve seen relief granted where a sole trader becomes a LTD / trading company after the year of assessment, effectively still working in the same employment, but this is the only exception that I’ve seen.

To apply for an AVC PRSA you need to be a current member of an occupational pension scheme with relevant earnings. Also when submitting the tax relief claim for 2019 the ROS system will ask:
1: What employment the pension scheme relates to.
2: What contributions were made in 2019 & how much relief was provided at source (if applicable)
3: What contributions were made between the period January to 31st October of 2020.

Regarding point 1 above, it’s a drop down box. In your case (as you are currently not employed in the Public Sector) the single scheme for the relevant department may not appear here. Also on no.3 the ROS system will know your date of leaving service. You could try it but it does not guarantee that relief will be granted.

As I said, I’ll try to do some joining of the dots between the TCA & the Revenue Pensions manual to see if I can come up with a more “official” line on this for you.
 
Smoneen said:
I’m not 100% sure if there is anything in the TCA that categorically states this. There’s nothing obvious in S.787 that’s jumping out at me but I’ll do some digging for you.

Yes it’s somewhat unfair but it’s also potentially a substantial relief from Revenue’s perspective. It also affects self employed individuals who cross over to other PAYE employment and vice versa, where they do not make the contribution prior to the relevant trade or employment ceasing. I’ve seen relief granted where a sole trader becomes a LTD / trading company after the year of assessment, effectively still working in the same employment, but this is the only exception that I’ve seen.

To apply for an AVC PRSA you need to be a current member of an occupational pension scheme with relevant earnings. Also when submitting the tax relief claim for 2019 the ROS system will ask:
1: What employment the pension scheme relates to.
2: What contributions were made in 2019 & how much relief was provided at source (if applicable)
3: What contributions were made between the period January to 31st October of 2020.

Regarding point 1 above, it’s a drop down box. In your case (as you are currently not employed in the Public Sector) the single scheme for the relevant department may not appear here. Also on no.3 the ROS system will know your date of leaving service. You could try it but it does not guarantee that relief will be granted.

As I said, I’ll try to do some joining of the dots between the TCA & the Revenue Pensions manual to see if I can come up with a more “official” line on this for you.
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Ahh thank you so much for all this! I was on to one company today as they specialise in the public sector, and the advisor seemed to think that I've no problem setting up AVC for 2019 after leaving the employer , but I wonder do they really know.... Another advisor from the same company told me it wasn't possible yesterday....

Then another company told me last week that there is a "mandatory" 5% contribution charge on all standard PRSAs (I asked them to clarify this as I was sure they were incorrect) and they told me I should take a non standard as its only 1.5% ann mgt charge. But I looked it up, and it's "max" 5% contribution charge.... So I think they outright lied to me? I'm wondering who I can trust with my life savings now tbh...
 
NoRegretsCoyote said:
Was this inside the EU or not?
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Outside. I'm a
Early Riser said:
I am not disagreeing. To set up the PRSA-AVC you shop around and find a broker to set up the AVC. Your employer does not have to know anything about this (and I doubt they would be interested). You pay your contributions via your bank account and arrange with Revenue to adjust your taxes accordingly. However, the scheme benefits are linked to the Single Scheme. You cannot draw down the benefits until you are drawing down the Single Scheme benefits. Or, should you take cost-neutral early retirement from the Single Scheme you have to take the benefits accrued through the AVC as well. You cannot transfer this PRSA-AVC to another employment in the private sector. However, you could transfer it if moving within the public service and remaining a Single Scheme member.

I don't know about setting it up now to take advantage of 2019 tax breaks. But what Smoneen says makes sense - given that you are not currently employed. As it seems like you are going to shop around for an AVC provider you might pose this question to some of them on the telephone. If it is possible, it would have to be done by the end of October.
Click to expand...
It looks like it is possible to set up ( what I am told is a ) 'public sector PRSA for 2019, and then set up a Private Sector PRSA next year for my Private Sector earnings in 2019.
 
SeaSwimmer said:
Then another company told me last week that there is a "mandatory" 5% contribution charge on all standard PRSAs (I asked them to clarify this as I was sure they were incorrect) and they told me I should take a non standard as its only 1.5% ann mgt charge. But I looked it up, and it's "max" 5% contribution charge.... So I think they outright lied to me? I'm wondering who I can trust with my life savings now tbh...
Click to expand...

You were lied to on both counts. As you subsequently found out, 5% is the maximum charge per contribution on Standard PRSAs. It ranges from 0% to 5%.

"they told me I should take a non standard as its only 1.5% ann mgt charge" Typical annual charge on a PRSA is 1%, with 0.9% available for certain Vanguard index-tracking funds. Where the sums involved are large the annual charge can be 0.75%, but this would usually be where you're transferring from another arrangement >€100,000.
 
@SeaSwimmer sorry only getting a chance to get back to you now. While I can’t find anything stated on a Revenue document that tax relief wouldn’t be granted in your circumstance I did come across some industry documents which state that relief is not possibe where an AVC is made after leaving service.

The first is in an IAPF circular which states “The general principle regarding tax relief on member contributions is that this is only allowed if these contributions are paid prior to termination of the member's employment.”

This seems to be backed up by some guidance documents by at least two of the Life companies. [broken link removed] is one from Irish Life with a note on AVCs on page 7 stating that the AVC cannot be made once the member has left service. I hope this is of some help.
 
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