Public servant nearing retirement - should I recycle private pension fund into AVCs

[RetirementPlan]

Hi AAM folks, I would welcome your views on how best to maximise my pension.

I'm in an Engineer grade public servant (post 2004 entrant) with about five years to go to retirement. I bought additional years service when the rates were better than now, so I'll be retiring with about 35 years service on a basic salary level around €90k. With adult kids around, I don't have any extra spare funds to put into my pension, beyond standard deductions.

I also have some private pension money from the halcyon Celtic Tiger days. This fund is currently valued at €160k. I've started moving chunks of this fund to lower risk investments as I approach retirement.

The key question for me is whether there is any value for me in retiring early for the purpose of my private fund to get my hands whatever the current value of the €160k is, and 'recycling' that money into AVC purchases on my main employment to maximise tax benefits.

So let's say I retired from the private fund at age 62, and used €20k each year to buy AVCs for my remaining three years. With the tax saving, I think this €20k could get me €28k approx into an AVC fund each year, adding €24k (€8k a year for three years) 'bonus' to my total fund when I come to retire at 65.

Obviously, there would be a bit of admin involved and some charges on the AVC side, but does this approach sound vaguely feasible? I discussed this with one expert, who mentioned I'd be getting close to the €200k limit on the tax free lump sum. I previously 'retired' to get my hands on an AVC fund worth €15k some years back. I'd be happy enough to have the extra money going towards a higher regular pension rather than the lump sum if that was feasible.

So in short, should I be trying to recycle money from my private pension fund into AVCs on my main employment for my last few working years?

Thanks in advance

 

[NoRegretsCoyote]

A few thoughts below:

So in short, should I be trying to recycle money from my private pension fund into AVCs on my main employment for my last few working years?

In principle this sounds like a pretty tax-efficient way to boost your retirement income.

I've started moving chunks of this fund to lower risk investments as I approach retirement.

It would be useful to hear more about what you mean by "lower risk" here. I am not a big fan of lifestyling as I believe that: (1) at your age you could still be drawing down in 25 years and over that horizon equities almost certainly beat bonds, (2) you have to look at risk across your whole portfolio, not just your pension fund. On retirement you will already have a contributory state pension and a public service occupational pension, most likely a paid-off mortgage too. So I'm not convinced that you need to take a low risk approach on our pension fund given that the basics (and more) will be well covered in all circumstances.

my total fund when I come to retire at 65.

Post-2004, pre-2013 public servants don't have an upper retirement age! You can work beyond 65 if you still want to of course (most people don't).

 

[RetirementPlan]

Thanks for the feedback. That's a fair point on the fund/risk issue, I'll keep that in mind. I'd be aiming to escape before 65 rather than after, tbh. One colleague of the same age who went into the CS on day 1 made his escape last month, making me rather jealous.

On the substantive issue, thanks for the feedback also. I'd be very interested to hear from a wider audience on this. It seems almost too good to be true, so I'm worried that I might have missed something.