Using AVC for Tax-free Lump Sum

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Sybilla

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Hi - I would be grateful for advice for a relative. She has worked for Maynooth University since 2003 and plans to retire in 2029 at 65. The Defined Benefit scheme's tax-free lump sum requires a commution of pension, based on a commutation rate of 9 (I think). This rate seems quite unattractive?

The maximum tax free lump sum would be c.€90,000 based on revenue rules (1.5 x salary), which would reduce the pension by €10,000 a year based on above.

Can the €90,000 tax free lump sum be funded by an AVC fund of €90,000 instead of commuting part of the defined benefit pension?

Apologies if this is a stupid question - I did search but couldn't find a clear answer.
Thanks for any advice or guidance where to get an answer to this question.
 
Does the relative have a pension scheme booklet where that info might be documented? Else probably need to get on to HR or Union Rep or the pension admin people.
 
If her salary is 60,000 and she has 26 years of service, this will generate a tax-free lump sum 58,500 (along with annual pension of 19500) when she retires at age 65. You can use an AVC to top this up further.
 
So she will retire with c26 years service. Normally, that would not result in her getting the max lump sum (but it depends on the scheme rules). Normally 26 years service might get a lump sum of 26x3/80ths, so c78/80ths x Salary.
Yes the max lump sum under Revenue rules would be 1.5 x Salary but the scheme may not pay that with only 26 years service.
If that's the case, then she could fund the difference by means of AVC's.
It might be possible (depending on the Scheme rules) to decline taking the lump sum from the main scheme (and thus not suffer any commutation pension deduction) and fund some or all of the 1.5 x Salary lump sum through AVC's.
She needs to check the scheme rules and perhaps get specific advice.
 
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