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Advice sought in relation to AVC's

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  • 24-10-2009 11:13pm
    #1
    SK1979
    Registered Users Posts: 1,510 ✭✭✭


    Hey guys

    I've a quick query that maybe someone on Boards might be able to help me with. My father has just retired (he was a teacher), and he's done it at really short notice. However, he is techically taking early retirement, as he doesn't have his full service.

    Is there a way that he can make an AVC payment to top up his pension / lump sum?

    I used to work in the industry but have left a number of years and am a little hazy about this area.

    Thanks in advance, and apologies if this has been asked before.

    S


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    #2
    broker2008
    Registered Users Posts: 750 ✭✭✭broker2008


    Depends on whether he had maxed out his AVC contributions or not otherwise he should be able to make contributions in the impending days. I presume he has no other source of income.


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    #3
    SK1979
    Registered Users Posts: 1,510 ✭✭✭SK1979


    Hey, thanks for the reply. He hasn't made any AVC's up to this point anyway. Technically he doesn't retire till next friday (end of the month) so I think he can contribute till then at least as he's still "employed"?

    He's probably about 2 - 3 years short of full service. I dont completely understand their scheme and my dad has no idea but I think its a 30/60ths pension with a 120/80ths lump sum?

    Is he able to buy back his full service through AVC's?

    He has no other source of income.

    Thanks again.


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    #4
    broker2008
    Registered Users Posts: 750 ✭✭✭broker2008


    He should get advice from someone specialising in this area. Do you Cornmarket look after the school/vec ?


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    #5
    ferga_com
    Closed Accounts Posts: 159 ✭✭ferga_com


    If he hasn't already made AVCs, it's very likely that he has scope to make a last-minute one to either: -

    (a) boost his tax-free lump sum. He gets tax relief on the contribution but then takes it back again next week tax-free.

    or

    (b) boost his pension

    or both.

    Even with full service, the teachers' superannuation scheme is unlikely to be offering maximum benefits allowed by Revenue.


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    #6
    SK1979
    Registered Users Posts: 1,510 ✭✭✭SK1979


    Thanks guys, it is indeed Cornmarket who are the brokers of the scheme. I was just pretty sure that he could make the AVC and wanted to try and re-affirm my belief before tuesday (and brokers is open again) where I will definitely make him speak to a financial advisor.

    Thanks to all who took the time to reply.


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    #7
    kaiser sauze
    Registered Users Posts: 1,558 ✭✭✭kaiser sauze


    He would be better off to contribute to notional service. There is no risk and instead of having the headache of two pension payments-and the ensuing tax balancing-at retirement it will remain as one, coming from the DoE.

    Ensure he has full notional service before even contemplating an AVC.

    AVCs are mainly unsuitable for public sector workers.


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    #8
    ferga_com
    Closed Accounts Posts: 159 ✭✭ferga_com


    This close to retirement, NSP may be very expensive as he can't spread payments out. If his resources don't extend to NSP then an AVC could be more useful as he could put in an AVC as a bed-and-breakfast transaction and withdraw it all in a few weeks' time tax-free, subject to usual limits.

    NSP is better than AVCs for those wishing to improve their pension and lump sum, but it is not best in all circumstances.


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    #9
    kaiser sauze
    Registered Users Posts: 1,558 ✭✭✭kaiser sauze


    ferga_com wrote: »
    This close to retirement, NSP may be very expensive as he can't spread payments out. If his resources don't extend to NSP then an AVC could be more useful as he could put in an AVC as a bed-and-breakfast transaction and withdraw it all in a few weeks' time tax-free, subject to usual limits.

    NSP is better than AVCs for those wishing to improve their pension and lump sum, but it is not best in all circumstances.

    It may be more expensive, but it is nearly always the better option. It is certainly riskless and guaranteed.


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    #10
    ferga_com
    Closed Accounts Posts: 159 ✭✭ferga_com


    kaiser sauze wrote: »
    It may be more expensive, but it is nearly always the better option. It is certainly riskless and guaranteed.

    As I said, it is the better option for those wishing to improve their pension and lump sum, as it is guaranteed. The pension provided is also index-linked to working teachers' salary increases, which is another benefit over AVCs.

    However, it is useless if you just want to increase your lump sum and can be inefficient if you want to fund for early retirement, in which case an actuarial reduction factor is used. AVCs are better for such circumstances.

    Horses for courses - neither option can be said to be better without reference to individual circumstances.


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