Query about AVC's

Galway2018

I am looking for a bit of advice, I am fortunate to have my mortgage nearly cleared, I have four years left. I am in my late thirties and want to see how best I can use the extra cash once my mortgage is cleared. My monthly mortgage repayment is 500 euros a month so I am considering putting that money instead into my pension/ AVC's. I am a teacher but I am on the new pension scheme so it definitely will not be the gold plated pension that current civil servants retire on now.
My question is would AVCs be a good idea and if so can anyone recommend a good scheme.

homer911

Don't forget the tax relief - you can gross up the contributions so the net cost is €500. the grossed up value will depend on your tax rate

Unless the rules have changed, you can only be a member of one pension scheme at a time

Galway2018

Thanks for that. I must look into the tax relief on it. Hoping to do AVC with Zurich so its going to be a separate fund from my teacher pension

EverythingGood

Galway2018 wrote: »

Thanks for that. I must look into the tax relief on it. Hoping to do AVC with Zurich so its going to be a separate fund from my teacher pension

Tax relief is your marginal rate.

coylemj

Galway2018 wrote: »

Thanks for that. I must look into the tax relief on it. Hoping to do AVC with Zurich so its going to be a separate fund from my teacher pension

Typically an AVC is a revenue-approved scheme which sits alongside your occupational pension scheme. In the case of teachers, there is probably one or two AVC providers whom you can go with and the monthly contribution will be deducted from your salary net of the tax relief i.e. you get the tax relief straight away.

Ask your union (INTO/ASTI/TUI), they will have all the details. In theory you could start an independent AVC but in that case you would have to claim the tax relief back after the event i.e. in January for the previous year.

The tax relief is at your marginal (top) rate. To convert a net cost of €500 to a gross contribution, if you are currently paying 40% then you gross up that €500 by dividing it by (1-marginal tax rate) i.e. 0.6 so 500 divided by 0.6 is €833.33 which would be your target gross AVC contribution. That will result in a net reduction of €500 in your take-home pay.

Liam D Ferguson

coylemj wrote: »

In theory you could start an independent AVC but in that case you would have to claim the tax relief back after the event i.e. in January for the previous year.

For a monthly contribution AVC PRSA, Revenue will usually increase your tax credits so you get the tax relief each month rather than having to wait until the following January.