Revenue Limits - Need for Broker for "paperwork"?!

deco87

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171
quick one , I am retiring early new year. Public service gratuity/pension. I have a PRSA /AVC , which finished last year. (30K or so in it)

My question is with my gratuity , there is an amount that I can take from my PRSA/AVC up to the set revenue limits.

All around me people are paying nice fees to the likes of cornmarket etc for advice on these types of policies.

Can I not send a "declaration/request - "proof of Gratuity" to , in this case , Zurich , and say , there is an amount that I can take to bring me to the
set revenue limit , here are my figures. Please send me that amount in due course ? Why do I have to pay a sizeable fee to some financial guy to in
essence do exactly the same thing?
I changed to a cash fund on advice of another financial chap , to try hang on to as much as possible .....

its reducing ........query to Zurich

Answer from Zurich ... ) The management charge is deducted from the fund value on the first of every month (.0833% is deducted over 12 months)
For this Zurich give me .....Quote" your policy is invested in a cash fund since July ( I requested this) the funds performance has returned a loss of 0.36%.

This is awful , 15 years paid into this , dwindling away , and I have to leave it there , worst investment ever made .... !! When I retire with a few days work a week
I'm, back in 40 % , what is the point of these policies ..mind boggles ......thanks
D
 
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LDFerguson

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4,088
When you retire, you can indeed deal directly with Zurich Life to withdraw your AVC PRSA funds. As you suggest you can send them all the relevant detail on your earnings, service etc., they will calculate the Revenue maximum and pay you the difference between your superannuation lump sum and the Revenue maximum. If there is a surplus of AVC funds after you've taken your lump sum, Zurich Life will tell you what your options are with that surplus but will not give you advice on which one is most suitable for your particular circumstances. They will also only show you the options regarding Zurich Life products for the surplus, not any other pension companies. Their products may or may not be the most suitable for your requirements.

When you switched into a cash fund, did the person giving you the advice to do so not explain to you that all pension cash funds are currently losing money due to zero and negative interest rates on institutional deposits and the fund charges? Did he not explain to you why he was recommending that you switch to the cash fund? You mention about hanging on to as much of it as possible. I presume that the advice was based on the thinking that if you are going to be withdrawing some or all of the AVCs in a matter of months, then a switch to a cash fund would protect you from a sudden drop in whatever fund you were previously in. If you hadn't taken this advice and there had been an unpredictable drop in the value of your fund of, say, 20% over a month or two, would you have been happy?

Which Zurich Life fund were you in before you switched to the cash fund? Many of their funds have performed quite well over the past 15 years.

When you were starting your AVC PRSA or at any point subsequent to that, did your broker know that you expected to be continuing to work part-time when you retired and that you expected to be paying 40% tax between your superannuation pension and your part-time work? If the broker was aware of this and continued to recommend that you fund your AVCs to a point greater than the tax-free lump sum element, this was bad advice. If your broker wasn't aware of your plans at retirement, then obviously they could only work with the information they had available.
 

deco87

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Messages
171
Thank you for taking the time to write this reply. Not sure what I went from in Zurich as I write. I think it’s graded 1 to 5 .. I think it was at riskiest and he advised dropping it to lowest risk. I believe it did reasonable ok.
Advisor just told me at the start the advantage was tax relief ... never really advised much else. I stopped paying in to it 3/4 years ago as I realised it was not of much use as all I could have ( I think it’s 4/5 k to limit) then it had to go to an arf or sone other product.
I had originally asked him the best way to save and get a lump sum at 55 which I am now .... this PRSA Avc was his recommendation... it’s of very little use to me as far as I can see .... if I work which I intend to do shortly ... I can earn very little as pension is 33k before I hit 40 per cent.
If I had my time back I wouldn’t have bothered with it ...
 

deco87

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Messages
171
Would you happen to know , by any chance the revenue limits presently ? Gratuity about 89 k probably slight less with obligation to windows / children fund ( obligatory) less. Probably the gross figure I would imagine you have to use , I would have thought .
 

LDFerguson

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Messages
4,088
Thank you for taking the time to write this reply. Not sure what I went from in Zurich as I write. I think it’s graded 1 to 5 .. I think it was at riskiest and he advised dropping it to lowest risk. I believe it did reasonable ok.
Advisor just told me at the start the advantage was tax relief ... never really advised much else. I stopped paying in to it 3/4 years ago as I realised it was not of much use as all I could have ( I think it’s 4/5 k to limit) then it had to go to an arf or sone other product.
I had originally asked him the best way to save and get a lump sum at 55 which I am now .... this PRSA Avc was his recommendation... it’s of very little use to me as far as I can see .... if I work which I intend to do shortly ... I can earn very little as pension is 33k before I hit 40 per cent.
If I had my time back I wouldn’t have bothered with it ...
After you have withdrawn the tax-free lump sum element from your AVC PRSA, you can put the balance of the fund into an ARF. You can choose to leave the ARF invested without taking any withdrawals until the year you turn 61. After that you start taking an income of 4% per year from it. When you eventually decide to give up the part-time work, you can then increase the withdrawals from the ARF while keeping your total income below the 40% rate. The tax bands may be widened in the meantime.
 

LDFerguson

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Messages
4,088
Would you happen to know , by any chance the revenue limits presently ? Gratuity about 89 k probably slight less with obligation to windows / children fund ( obligatory) less. Probably the gross figure I would imagine you have to use , I would have thought .
The methods of calculating the Revenue maximum lump sum are in the Revenue Pensions Manual. https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-07.pdf

While you can use this to come up with a figure for your own planning, you should get Zurich Life to verify your figures.
 

Early Riser

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640
I think you mentioned in another post that you have about 35 years in the public service. If so the Revenue limit is likely to be 1.5 times your pensionable salary. However, you also said that you are retiring at 55. If this is cost neutral early retirement (eg, if your normal retirement age is 60) then that limit is reduced by the formula LS*N/NS, where LS is the fore-mentioned Revenue maximum, N is the number of years of actual service and NS is the number of years service you would have had if you had remained in post until normal retirement age.

See 9.4 here for more : https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-09.pdf
 

deco87

Frequent Poster
Messages
171
I think you mentioned in another post that you have about 35 years in the public service. If so the Revenue limit is likely to be 1.5 times your pensionable salary. However, you also said that you are retiring at 55. If this is cost neutral early retirement (eg, if your normal retirement age is 60) then that limit is reduced by the formula LS*N/NS, where LS is the fore-mentioned Revenue maximum, N is the number of years of actual service and NS is the number of years service you would have had if you had remained in post until normal retirement age.

See 9.4 here for more : https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-09.pdf
Thank you . I can get why a broker may be now required !!!! Getting confusing now ....
I can retire at 30 years service.
I joined on 20 th birthday .. must retire on 60 th birthday ! I think though pension is calculated over 40 years ....
 

Early Riser

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Messages
640
Thank you . I can get why a broker may be now required !!!! Getting confusing now ....
I can retire at 30 years service.
I joined on 20 th birthday .. must retire on 60 th birthday ! I think though pension is calculated over 40 years ....
Most pre-2004 public servants have a normal retirement age of 60 (not compulsory retirement - they can continue beyond this). If they retire and take their pension before 60 it is on an actuarially reduced basis (Cost Neutral Early Retirement). If this is your situation then the Revenue limit on the pension lump sum is reduced according to the formula in my previous post.

However, some grades/sectors have an earlier normal retirement age (such as 50 or 55). This applies to Gardai and Prison Officers and some others. If you have an earlier retirement age then the Revenue reduction formula does not apply. Surely you know yourself whether you took normal retirement as opposed to Cost Neutral Early Retirement?
 

LDFerguson

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4,088
Assuming that you're not a Garda, Prison Officer or other public servant that is allowed an early Normal Retirement, and assuming that you will retire on your 56th birthday after exactly 36 years' service, then the Revenue maximum lump sum would be (1.5 x salary) x 36/40.
 
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