28 y/o Starting pension - Are AVCs the best way to go?

yabadabado

Apologies to jump in here but I've a similar query.

I stated in the PS in 2005 and will have 40 years service at retirement.

I'm also thinking of going with a PRSA or AVC .

Anyone recommend a good financial adviser ?

I'm saving some money every month but not really putting it to much use,just going into credit union.

Thinking I'd continue saving half with credit union and put the other half into a plan and get 40% tax back.500 into a AVC would have a real cost of €300 ?

billyhead

august12 wrote: »

So you will have the full 40 years service, I thought the purpose of AVC was to make up the shortfall if one didn't have the 40 years, my understanding of this, you can only take 1.5 times of your salary tax free, anything above this will incur tax, prsi, USC etc. You can stop paying into this policy but there will be an annual management fee I would presume,

Cheers for the response. If I was to cancel it and withdraw it would I still get the full amount of money I put or saved away in the scheme thus far? Would it be financially more sensible to stop paying and leave the account in situ but keep paying the annual management fees and avail of the tax relief earned to date and then once I retire withdraw the funds and close the account.

august12

billyhead wrote: »

Cheers for the response. If I was to cancel it and withdraw it would I still get the full amount of money I put or saved away in the scheme thus far? Would it be financially more sensible to stop paying and leave the account in situ but keep paying the annual management fees and avail of the tax relief earned to date and then once I retire withdraw the funds and close the account.

To be honest, I have no idea as I don't have a financial background, am in the PS also and will have a shortfall of years due to worksharing for many years, it would be worth your while going to an independent financial broker and seeking advice or at the very least, if in the cornmarket scheme, contacting them for your best options and giving details of your potential years of service etc. I have asked boards members for clarification on the tax issue of lump sum above the 1.5 salary, this obviously would have a bearing on how you invest and how much to invest. Obviously, if paying the higher rate of tax, then there is an obvious benefit to AVCs,
Re your query above, is there a tax implication to withdrawing AVCs before a certain age?

caviardreams

Rothmans wrote: »

Really?

That'd be great if true. However, while the single scheme policy document states that the Single scheme is calculated on the assumption that the Contributory pension will be there in it's current form, it makes absolutely no suggestion that the state will make up the shortfall if it's gone or reduced.

Can you give me any information source for the above. As I said, it would be great if true, but I fear it may just be another generalised assumption about public service pensions.

Obviously nobody knows what's going to happen in the future, but the unions would not stand for it and there would be strikes left right and centre if staff coming up to retirement were not going to get promised benefit i.e. half their average salary with 40 years contributions, whether it comes from state pension + occ pension, or the govt having to make good on it by topping up the occ pension to the same level imo.

Rothmans

caviardreams wrote: »

Obviously nobody knows what's going to happen in the future, but the unions would not stand for it and there would be strikes left right and centre if staff coming up to retirement were not going to get promised benefit i.e. half their average salary with 40 years contributions, whether it comes from state pension + occ pension, or the govt having to make good on it by topping up the occ pension to the same level imo.

You see that's the thing. You're referring to anyone who joined the public service between 1995 and 2013.

The pension for pre 95 entrants is the best one .I.e. 50% of the average of your final three years. For example, if your average salary for your final 3 tears is 60k, your pension will be worth 30k per annum.

For the cohort between 95 and 13, their salary is (average of your final three years) minus €12,700. So a public servant who joined between 95 and 13 on a final average salary of 60k will get an occupational pension of 30k - 12,700 = 17,300. This is based in the understanding that they will be availing of the OAP at 68. For anyone who retires before 68, or are in a job with an mandatory retirement age of 60, they are left with a shortfall which I believe has not been addressed yet.

As far as I am aware, there is no understanding that those on the single scheme will be paid the equvilant of the OAP when the hit 68, if the OAP is gone, or reduced.

judeboy101

Rothmans wrote: »

You see that's the thing. You're referring to anyone who joined the public service between 1995 and 2013.

The pension for pre 95 entrants is the best one .I.e. 50% of the average of your final three years. For example, if your average salary for your final 3 tears is 60k, your pension will be worth 30k per annum.

For the cohort between 95 and 13, their salary is (average of your final three years) minus €12,700. So a public servant who joined between 95 and 13 on a final average salary of 60k will get an occupational pension of 30k - 12,700 = 17,300. This is based in the understanding that they will be availing of the OAP at 68. For anyone who retires before 68, or are in a job with an mandatory retirement age of 60, they are left with a shortfall which I believe has not been addressed yet.

As far as I am aware, there is no understanding that those on the single scheme will be paid the equvilant of the OAP when the hit 68, if the OAP is gone, or reduced.

The pre 95 and 95-2013 are the same in terms of the 30k but the pre 95 get it all from one source and can't claim prsi oap and 95-13 group get basically half and half?

Rothmans

judeboy101 wrote: »

The pre 95 and 95-2013 are the same in terms of the 30k but the pre 95 get it all from one source and can't claim prsi oap and 95-13 group get basically half and half?

No the occupational pension is as I outlined above. They are left 12,700 shortfall the assumption that they will claim the the OAP once they turn 68. They will not be entitled to claim this until 68, and the Contributory pension that we all pay 4 % towards and everybody, public or private, is entitled to. It is entirely distinct from the occupational pension, but it's value is deducted from the occupational pension such that in effect there is no OAP for the 95 to 13 bunch.

Geuze

billyhead wrote: »

Cheers for the response. If I was to cancel it and withdraw it would I still get the full amount of money I put or saved away in the scheme thus far? Would it be financially more sensible to stop paying and leave the account in situ but keep paying the annual management fees and avail of the tax relief earned to date and then once I retire withdraw the funds and close the account.

You can get the benefits of the AVC when you retire.

Geuze

Rothmans wrote: »

Y

For the cohort between 95 and 13, their salary is (average of your final three years) minus €12,700. So a public servant who joined between 95 and 13 on a final average salary of 60k will get an occupational pension of 30k - 12,700 = 17,300. This is based in the understanding that they will be availing of the OAP at 68. For anyone who retires before 68, or are in a job with an mandatory retirement age of 60, they are left with a shortfall which I believe has not been addressed yet.

For PS hired post 1995, they can get a supplementary pension to cover them between retirement and when the SPC kicks in.

It's not automatic, there are conditions attached.

Rothmans

Geuze wrote: »

For PS hired post 1995, they can get a supplementary pension to cover them between retirement and when the SPC kicks in.

It's not automatic, there are conditions attached.

But not for those post 2012

Ace2007

billyhead wrote: »

Cheers for the response. If I was to cancel it and withdraw it would I still get the full amount of money I put or saved away in the scheme thus far? Would it be financially more sensible to stop paying and leave the account in situ but keep paying the annual management fees and avail of the tax relief earned to date and then once I retire withdraw the funds and close the account.

You can't just withdraw your AVC's - they are there for until you retire.

AVC - maximise your tax free lump sum at retirement, you could take a cash lump sum up to 500k taxed at 20%. So the closer you get to retirement you should be making use of the fact you can put up to 40% of your total earnings into your AVC tax free, and then get them back in a few years paying either no tax, or 20% tax - which is a win win if your marginal rate of tax is 40%.

You could buy an additional pension from the a life office and have this in addition to your PS pension.

You may be able to go down the ARF/AMRF route and continue to have the monies invested post retirement and drawdown if and when you need it - this is particular useful way of passing monies on for inheritance reasons.

Get advise from an independent advisor.

yabadabado

Anyone able to recommend an independent adviser?