Last Minute AVCs

podgeandrodge

Can anyone confirm my understanding (or misunderstanding) of last minute AVCs for public service:

1) It's lump sum investment at last minute for the amount of the shortfall between what you could get as lump sum after 40 years (1.5xsalary) to get up to 40% tax back on that shortfall.

2) If retiring in, say, February, you wouldn't have earnt enough to be on 40% tax, so in effect, what you are doing is investing in February, and claiming the tax back against the PREVIOUS year?

3) If retiring early, e.g. 30 years out of 40 years service, your lump sum is reduced under Cost Neutral Early Retirement. Hence the ability to calculate the shortfall. HOWEVER, is it true that Revenue also reduce the 1.5xsalary cap on the "potential" lump sum due to the reduced service?

For example: A public servant on 60k normally ends up with €30k pension after 40 years and €90k lump sum

If a public servant retires with only 30 years, my calcs say they get a €14,040 pension and €55,485 lump sum per Cost Neutral Early Retirement rules.

In the above case, is the shortfall for AVC investment €34,515 (90000-55485) OR, 

is the max Revenue allowable lump sum only €67,500 (90k by 30years/40 potential years) - in which case the shortfall is only €12,015 (67,500-55485) - this interpretation follows what I read in a pensions manual giving a Revenue max lump sum calculation as

N x P NS Where: N = number of actual years of service P = maximum pension approvable had the employee served to NRA NS = number of years of total potential service to normal retirement age had service continued until then

And in relation to the above - if this is the way to calculate, does N include months or only full years?

Thanks!