Question for a friend in the CS - they just got a statement for purchasing notional service and they have approx 16 years left until retirement. The annual payent works out at 700 per year for the 16 years - the lump sum payment (one off) is 17k - which is more expsnive. Can ayone explain this? I would have thought it would be cheaper to pay it all up front now?
Is the €700 net of tax relief or something?
Whereas the €17k figure is gross but around €10k after tax relief and then less than the €700k a year?
I thought it could be something like that but teh difference seemed quite large
There's an argument AVC are better option. Not entirely sure who.
You’d need wage growth of well north of 50% over the period for the cash amounts to break even. Not impossible but I wouldn’t use it as a base scenario.Given wage inflation, increments and possible promotions it is very likely that the periodic deductions will accumulate to at least the equivalent of the lump sum.
You’d need wage growth of well north of 50% over the period for the cash amounts to break even. Not impossible but I wouldn’t use it as a base scenario.
And if wage growth is that much then interest rates and inflation will be high too so person would be better off investing in something else along the way.
To me the periodic approach seems like a no-brainer.
But this is a very narrow answer to the question. @Early Riser is correct that there are other potential factors.
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