AVC / AVCs / Additional Voluntary Contributions

If you work in the public sector in Ireland, PSRA can provide truly impartial advice on Additional Voluntary Contributions (AVCs). Our clients include many teachers, lecturers, doctors and nurses who were not satisfied with the advice they received from less neutral sources.  PSRA owe no allegiance to any insurance company, union or employer - we simply advise what is best for you. Our expert advisors will clearly outline the issues around AVCs if you are considering one, or how to make the most of any AVC you may already hold.

Get the right advice on AVCs - without the pressure - by contacting us today.

What is an AVC?

AVC stands for Additional Voluntary Contributions. As the name indicates, it is in addition to, or on top of, an existing pension scheme. For our clients that are typically Superannuation - the public sector pension scheme.  In essence, it is a form of private savings, built up while you are working which is used to supplement your lump sum and/or income when you retire. It can take the form of a group AVC scheme or an individual PRSA AVC, both are fundamentally similar.

Benefits of an AVC

What makes an AVC different to other forms of savings is that because it is designed to save towards retirement, AVCs enjoy various tax reliefs such as;

  1. Tax relief on contributions.
  2. Tax-free growth.
  3. Some/all of your AVC may be tax-free at retirement.

Naturally there are rules and limits to these reliefs, however, with proper financial advice and planning, an AVC can be a very effective tool in reducing tax and improving future finances.  

What makes a good AVC?

Essentially an AVC is a savings plan, typically one designed to work over long periods of time. Like any savings plan, therefore, its final value is largely determined by

  1. The amount invested.
  2. The investment returns
  3. The charges

PSRA advisers conduct research on your behalf, to find those AVCs with the best possible performance and charges suitable for you.

Should I have an AVC?

For some, an AVC is an appropriate choice. For others, the PCW buyback scheme and the Notional Service scheme should be examined. In some cases, none of these options will be appropriate. Indeed, many clients are advised to stop their AVCs if there is more than an optimal amount already invested. Only by getting impartial advice can you ensure you are choosing the option best suited to you.


How does the tax relief work?

AVCs and PRSA AVCs qualify for tax relief at your marginal rate of tax. In short, this means that if you pay the top rate of tax (currently 40%), that for every €100 saved for retirement, you can enjoy a €40 tax refund now. If you are a 20% rate taxpayer the refund is €20 for every €100 saved.

Limits to Tax Relief

Revenue allows generous amounts of income to be saved into pensions and enjoy tax relief. The limits increase as one approaches retirement:

Under age 30: 15% of earnings

Age 30 - 39: 20% of earnings

Age 40 - 49: 25% of earnings

Age 50 - 54: 30% of earnings

Age 55+: 35% of earnings

Age 60+: 40% of earnings

Note that this is subject to an overall limit of earnings of €115,000 per annum. Furthermore, account must be taken of contributions already made to Superannuation during the year. For those with more than one source of income, for example, medical practitioners with public and private income, additional restrictions apply. In addition, overall limits apply to ensure the total pension value does not exceed a total value of €2M. While this limit appears high, public sector workers due to receive good annual pensions are in danger of breaching it as a multiplier is applied. If the limit is breached penalties are applied. Speak to a PSRA advisor to ensure your pensions are Revenue compliant. 

Transferring existing AVCs

Benefits

Many PSRA clients have transferred existing AVCs into individual PRSA AVCs. There are many advantages to doing so including;

  1. To avail of lower charges. Management charges are extremely competitive, typically as low as 0.75% per annum.
  2. To control those charges and have certainty around future charges - group scheme AVC charges can vary in line with decisions made by Trustees, not by the individual.
  3. To avoid fees which may be levied in future by any union appointed broker on the group scheme.
  4. To avail of investment fund managers, funds and investment strategies that are not available through the group AVC structure. Such choices may outperform those available on the group scheme.
  5. To gain control over premiums by way of a set monthly direct debit. Contributions through payroll typically fluctuate with salary.
  6. To gain the flexibility to move the PRSA AVC to future employments.
  7. To gain the freedom to choose and change the advisor/ broker on the AVC as you wish.

How to transfer

It’s very easy to transfer. Speak to PSRA advisor today to find out how simple it is to switch. For AVC fund values over €10,000, a certificate of comparison is prepared by an independent actuary. This ensures the proposed transfer is to your advantage.  To transfer to our Standard PRSA AVC offering, there is no cost to you. Speak to us today to gain control of your AVC and start reducing costs.

Using AVCs to Buy back years with your employer

For those who have an amount built up in a group AVC or PRSA AVC, it is possible to transfer such monies to your employer to buy back PCW years or notional service years. Our advisors can explain the benefits and process of doing so.

Last Minute AVCs a.k.a Late AVCs

A last-minute AVC can be used by those soon approaching retirement without existing AVCs. It’s often used to maximise the amount of tax-free cash that can be drawn down after retirement. Usually, money is invested in an AVC prior to retirement and tax relief is claimed. Then after retirement, the sum invested is withdrawn tax-free.

For example, one might invest €10,000 and claim back €4,000 from Revenue through tax relief. Immediately after retirement, the initial €10,000 is then withdrawn. Provided it issued to top up tax-free lump sum received from the employer, there is no tax owed on exit. 

It’s important to note this is just an example. There are restrictions on any individuals scope to avail of a last minute AVC. Fees and charges will also apply. Make sure you seek advice from PSRA in plenty of time prior to your retirement in order to plan effectively.

  

Options with an AVC at retirement

At retirement, AVCs will firstly be used to maximise the amount of tax-free cash that can be taken. Often this is to top up an employee’s lump sum to the equivalent of someone with 40 years’ service, despite not having full service themselves. If there are additional monies in the AVC, this is taxable but there are options as to how those monies are accessed. These typically include;

  • Buy a pension or annuity.
  • Take as a taxable lump sum.
  • Invest in an Approved Retirement Fund (ARF) or Approved Minimum Retirement Fund (AMRF).

Again, there are rules and restrictions around these options. Your individual circumstances will influence which of these options may be most appropriate. If you are approaching retirement and have an AVC, speak to PSRA to understand the advantages and disadvantages to each of these options.

PSRA Advisors are experts on how Additional Voluntary Contributions (AVCs) can be used to effectively supplement your pension. Request a call today to improve your retirement plans.

Note: Investments can fall as well as rise. Past performance is no guarantee of future results.

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If you are unsure which may be the most appropriate service for you, call us today, we’d be happy to guide you.

What our clients say
Our Testimonials

“I have been delighted with the service provided by PRSA. Evan Hughes has been a dependable and clear guide through the maze of financial constraints and possibilities in advance of retirement. I've been able to turn to him with every sort of financial question and have been consistently well advised”

Prof Lawrence Taylor, Associate Vice-President for International Affairs, Maynooth University

I've had a very positive experience of PSRA , specifically their representative Joe Murray. Over the course of an advisory session he clarified various matters ranging from life assurance, salary protection and AVCs. Joe also discovered that I was due a tax refund and this, together with savings on two other insurance products, left be better off by €1400 - not bad for an afternoon's work! Joe is patient and extremely clear and he explained pensions to me in a way that was coherent and accurate. I would highly recommend this service.

Leo Hogan, School Principal

It is my pleasure to recommend Clodagh Byrne of PSRA. During the past year, I have been very impressed and pleased with the top-notch professional and personal service Clodagh has provided in the area of retirement planning and investments. She crunches the numbers efficiently and explains all options clearly so that I can make informed, confident choices and decisions. Truly, she has helped me to navigate smoothly and successfully across the complex terrain of pensions and retirement planning. I thank Clodagh Byrne for all her help and highly recommend her to anyone who is looking for sound retirement advice—without any sales pressure. I look forward to working with Clodagh throughout my career as a teacher.

Michael Schwartz, Teacher, Waterford

Original contact with Evan Hughes of PSRA, in Beaumont Hospital. Consistent personal professional attention from Mr Hughes. Sound financial advice and pension planning. I have recommended Mr Hughes to colleagues and friends and no hesitation in doing so again.

Prof Anthony Cunningham, Medical Director Galway Clinic

Ciarán Hughes was recommended by a friend working in the HSE. Starting out in my career I wanted to get salary protection sorted and to find out about my pension situation. Ciarán went through everything with me, and explained the different aspects clearly. It was a relief to get everything sorted and out of the way. I have recommended Ciarán to friends and colleagues.

Jenny Algar, Veterinarian Surgeon, Dept. of Agriculture & Private practice.

I was first introduced to PSRA at a retirement presentation delivered by Evan Hughes. The talk was extremely informative, to the point, and helpful in preparing for retirement. Evan aided me throughout the process of retirement and continues to advise on my finances. I highly recommended that anyone seeking retirement and investment advice turn to PSRA.

Rod Green, Teacher, Dublin

On my recent retirement, PSRA consultant, Ciarán Hughes provided me with clear, concise and sound information on all aspects of financial planning and investments. He explained all my options in detail and was happy to answer any questions I had. He met with me on a number of occasions to tease things out and was also available by phone or e mail to deal with any other concerns I had. I am confident that I received accurate, impartial advice and was facilitated in every way, to plan astutely for my future. I would highly recommend PSRA to anyone requiring financial advice.

Ann Gallagher, Retired Teacher, Sligo

I am delighted to strongly recommend Evan Hughes - PSRA who on the advice of a satisfied colleague, have been managing my financial affairs very effectively with excellent outcome despite the hazards of the economically turbulent previous decade or so. Meetings were easily promptly arranged at times and locations convenient to me during a very busy phase. They are always relaxed, pleasant, interesting and enjoyable. Advice is clear and logical without pressure, obviously based on wide experience. Potential outcomes good and bad are laid out clearly and the outcomes despite the turbulent markets were good and as predicted without unpleasant surprises (and no tendency to churn). I strongly recommend Evan and PSRA to be consulted for guidance before involving themselves in the treacherous financial markets and investments, confident that the advice they receive will definitely be beneficial and profitable.

Michael (& Mary) O’Reilly FRCPI, FACC, FRCP(C), Consultant Cardiologist

While my previous contact with financial consultants had always left me feeling confused, unsure and not fully informed, my experiences with PSRA consultant Clodagh Byrne were dramatically different. Clodagh is a clear thinker, an excellent communicator, very knowledgeable, well informed, patient and understanding. She has a professional manner and willingly invests time in our consultations. I have total confidence in the comprehensive, expert and sound advice I received. As a result I have already and will continue to recommend PSRA to my colleagues.

Vincent McDonnell, Retired Teacher, Wexford.

I got a lot of advice from friends when I was thinking of retirement. Unfortunately it was not accurate, everyone's situation is a little different. I was delighted with the expert help and advice I got from Evan Hughes. PSRA give very efficient and friendly service at a very reasonable cost. It worked well for me.

Christina Quirke, Nurse, Dublin

“I came to PSRA in 2010 the year I retired. It was recommended to me by a colleague at work. I have had very good advice from Evan Hughes initially on setting up the ARF. I have had annual reviews which have been satisfactory and efficient. I am very happy with the service I have had over the years and have no hesitation in recommending PSRA.”

Dr Joseph A. Tracey, formally of Beaumont Hospital.

“I was very happy with my one to one consultation which outlined all the available options to me. I felt my consultant’s knowledge was extensive and he portrayed the information in an easy to understand manner. I feel the independent advice aided my decision-making process and I am very happy with my policy.”

Nicola (surname withheld), Occupational Therapist

I'm delighted to have the opportunity to recommend Clodagh Byrne. From the moment I met her a few years ago I have felt very comfortable with her. She takes time to explain everything very clearly. She has advised me on AVC, life assurance and investment issues. I took early retirement last summer and she has been very helpful in organising my paperwork. She has given me clear advice on investment. She is a very good listener and I have never felt any pressure, just clear advice tailored to my needs. It has always been a pleasure to have meetings with her and I hope to continue to benefit from her advice in the future.

Brid Larkin, Retired Primary Teacher, Waterford

I retired at an earlier age than usual from the Public Health Service five years ago and for the past seven years, Evan Hughes of PSRA has been excellent and indispensable in advising, negotiating and implementing my pension and investments. I would recommend PSRA to my colleagues because Evan is a very nice and patient person who is meticulous and professional in his advice and has provided maximum benefits for my family and continues to review my pension and investments.

Retired Consultant Medical Practitioner (Name withheld)

I first met PRSA consultant Ciaran Hughes when he made a presentation to teachers in The Carrick on Shannon Education Centre where the information he disseminated was clear and easy to understand which was important to me as I was approaching retirement. My husband and I both retired recently and the information he provided was at all times concise, objective and appropriate to our needs. He explained all options in detail and answered all of our many questions. He was patient, courteous and good humoured as he went through the different options and through his sound and at all times impartial advice helped us explore different scenarios and find products that suited our needs. He met with us and was also available by phone and email and I really appreciated the support at this transitional time. I have strongly recommended Ciaran and PRSA to a number of friends and will continue to do so.

Mary (surname withheld), Retired Teacher, Longford.

I joined PSRA to have some reasonable pension at retirement to live a decent lifestyle. My friend introduced Evan Hughes to me. He provided honest and good service to me and is always there to help any concerns or query. Although I have invested in Sharia Compliant funds which have risks, this has been explained to me and well managed. I will certainly recommend friends to take help and services of Mr Evan Hughes.

Dr Tallat Ejaz, Mullingar Hospital

I have been dealing with PSRA consultant, Ciarán Hughes, for approximately six years and I have always been extremely satisfied with the advice rendered. While I was teaching he advised on all matters financial: Salary Protection, Health Insurance, Life Cover. He explained everything very concisely and his recommendations were impartial, based on his vast knowledge and experience. Upon my retirement Ciarán presented comprehensive and wide-ranging options for investment. Ciarán has responded promptly to all queries and has done so with extraordinary patience, clarity and good humour. It remains a pleasure to deal with him.

Bernadette James, Retired Teacher, Sligo

I was very pleased with my recent meeting with Clodagh Byrne. This was the second time in the past few years I have availed of her excellent financial expertise. As always, she was lovely and friendly, explained everything very clearly and was practical and realistic with her advice. I have met with other financial advisors before and always felt they were trying to 'sell' me what they wanted, but with Clodagh I feel she genuinely strives to provide the best advice and service suited to my situation. She has advised both myself and my husband on AVCs, life assurance, salary protection, health insurance and tax. She is always very helpful in organising necessary paperwork and quick to reply to concerns or questions following a visit. I have often felt out of my depth trying to understand pensions and taxes but Clodagh explains everything so well and in a manner where I am comfortable asking any question no matter how simple. I fully intend to have further meetings with her every few years to review my financial situation and will look forward to her pleasant and knowledgeable manner.

Helen Stafford, Teacher