Overpaying AVC's??

Blub123

Other half is 43, having started teaching at 19.
Took 1 year abroad teaching.
Apart from that has had constant service. Began paying into AVC's month 1.

Total contribution @ 63K
Annual contributions @ 6,800
Current value @ 80,600
Projected value at age 65 @ 275k

Notional idea of early retirement at 55.
At this point, growth rate at current avg rate would give an AVC value of €187K

Another teacher mentioned that there is a point at which you are paying too much into AVC's and she has probably passed that point.

Is this true?
What are others opinions given above and hopes for early retirement?
Are there many others in the same position? and if so what are they doing with Avc levels etc?

Many thanks!

solerina

Blub123 wrote: »

Other half is 43, having started teaching at 19.
Took 1 year abroad teaching.
Apart from that has had constant service. Began paying into AVC's month 1.

Total contribution @ 63K
Annual contributions @ 6,800
Current value @ 80,600
Projected value at age 65 @ 275k

Notional idea of early retirement at 55.
At this point, growth rate at current avg rate would give an AVC value of €187K

Another teacher mentioned that there is a point at which you are paying too much into AVC's and she has probably passed that point.

Is this true?
What are others opinions given above and hopes for early retirement?
Are there many others in the same position? and if so what are they doing with Avc levels etc?

Many thanks!

Great question, I would love to know the answer as I feel I may be better of stopping mine too, have a lot paid in already.

jimmycrackcorm

There are two aspects of AVC's. The first is the tax-efficient benefit where you effectively gain extra savings, especially at the marginal rate. The second is fund growth over a long term based on the additional money you are supplying to the pension fund and accelerating growth. I have no idea what this means for public service pensions, but perhaps if you are going to pay AVC's, then put them into a private pension fund.

killbillvol2

The idea behind stopping as I understand it is related to tax relief. You're getting tax relief at the top tate on your contributions. If you have too much in your fund you'll also be paying top rate tax on your withdrawals which isn't ideal.

There's a requirement to withdraw a minimum of 4% per annum from age 61 (assuming you're retired) so 4% of a large pot would mostly be taxed at the top rate given that your pension would be close to the limit of the lower tax bracket.

Smee_Again

killbillvol2 wrote: »

The idea behind stopping as I understand it is related to tax relief. You're getting tax relief at the top tate on your contributions. If you have too much in your fund you'll also be paying top rate tax on your withdrawals which isn't ideal.

There's a requirement to withdraw a minimum of 4% per annum from age 61 (assuming you're retired) so 4% of a large pot would mostly be taxed at the top rate given that your pension would be close to the limit of the lower tax bracket.

But you’d be paying income tax on the money now by not paying into an AVC, so either way the tax has to be paid. May as well pay it in the future when it has hopefully grown in size.

yabadabado

Blub123 wrote: »

Other half is 43, having started teaching at 19.
Took 1 year abroad teaching.
Apart from that has had constant service. Began paying into AVC's month 1.

Total contribution @ 63K
Annual contributions @ 6,800
Current value @ 80,600
Projected value at age 65 @ 275k

Notional idea of early retirement at 55.
At this point, growth rate at current avg rate would give an AVC value of €187K

Another teacher mentioned that there is a point at which you are paying too much into AVC's and she has probably passed that point.

Is this true?
What are others opinions given above and hopes for early retirement?
Are there many others in the same position? and if so what are they doing with Avc levels etc?

Many thanks!

They really should be speaking to the provider,I'm presuming its with Cornmarket.

They will have all the info to hand and should be able to give the best advice.

nqtfarmer

What are people’s experiences with various AVC companies? Cornmarket, Zurich, public vs private? Is there a difference?

bilbot79

Smee_Again wrote: »

But you’d be paying income tax on the money now by not paying into an AVC, so either way the tax has to be paid. May as well pay it in the future when it has hopefully grown in size.

Well...better off spending it now while you're young

Geuze

nqtfarmer wrote: »

What are people’s experiences with various AVC companies? Cornmarket, Zurich, public vs private? Is there a difference?

AVCs are all private.

Cornmarket is a broker.

Zurich is an insurer/assurance co./pension company.



I don't like the high fees charged by Cornmarket, but to be fair, if you want your hand held as you set up an AVC, they do have the history/experience/systems.

I used a discount broker to cut out those fees.

Geuze

Blub123 wrote: »

Other half is 43, having started teaching at 19.
Took 1 year abroad teaching.
Apart from that has had constant service. Began paying into AVC's month 1.

Total contribution @ 63K
Annual contributions @ 6,800
Current value @ 80,600
Projected value at age 65 @ 275k

Notional idea of early retirement at 55.
At this point, growth rate at current avg rate would give an AVC value of €187K

Another teacher mentioned that there is a point at which you are paying too much into AVC's and she has probably passed that point.

Is this true?
What are others opinions given above and hopes for early retirement?
Are there many others in the same position? and if so what are they doing with Avc levels etc?

Many thanks!

It is possible to overpay AVCs, yes.

Unlikely, but possible.

It is complex, ask your broker.

Treppen

I know this article is fairly old so I'd be interested to know if Cornmarket are doing the same "special service"... https://www.irishtimes.com/business/avc-prsa-can-pay-for-public-sector-employees-1.408122

5% on every contribution is quite a tidy sum in their pocket over a couple of decades.

Have a look at LA Brokers who charge 0% contribution. Keep in mind though, the most advice or info you'll get from them is the forms to fill out in the post, whereas Cornmarket have no problems chatting till the cows come home.

I had a PRSA before going into teaching with BOI , they're charges were to the max 1% commission + 5% contribution, I often thought about changing but their fund was actually performing decent enough so I stayed.

So there is the possibility your fund might have very low charges but could have invested all your money in fidget spinners awaiting a comeback :pac:

AndrewJRenko

The overpayment could be referring to the €200k fund size limit to qualify for full tax relief on contributions.

These guys will do an individual review of your pension options by Zoom if you contact them.

https://ipsfinancialadvice.ie/