AVC's Secondary School Teacher

Emmser · 21-12-2014 11:05pm #1

Hi all, I'm a post primary teacher on 22 hours. I've been teaching since I was 24 and I'm now hitting 31. So my pension if I retire at 65 will be roughly 11k per year and if I retire at 55 itll be less due to penalties. I therefore set up an AVC scheme paying in about 13% of my salary with the government contributing my tax to the scheme in the hopes id be in a financial position to retire at 55. My brother whose also a post primary teacher told me they've been told that the AVC's are scams by another financial institution and you will never see the money you put into it even returned to you less alone the money the government puts in! I'm now concerned i signed up to a bogus scheme but I'm also aware because im a teacher post 2004 my pension is 11k per year until I'm 68, what should I do (and that's only if I stay teaching until I'm 65)? Is my brother's information false? He said a lot of the teachers in his school who took out AVC's years ago are now regretting it and very angry. I understand there's three levels etc for AVC's but I'm only interested in finding out if I was in the safest level would I still essentially 'lose' money and be one of these 'angry' teachers. Thanks in advance.

rainbowtrout · 22-12-2014 12:07am

Emmser wrote: »

Hi all, I'm a post primary teacher on 22 hours. I've been teaching since I was 24 and I'm now hitting 31. So my pension if I retire at 65 will be roughly 11k per year and if I retire at 55 itll be less due to penalties.

State Penion won't be paid out until you are 68. Not sure you can go early either as you are post 2004.

Emmser wrote: »

My brother whose also a post primary teacher told me they've been told that the AVC's are scams by another financial institution and you will never see the money you put into it even returned to you less alone the money the government puts in!

Who told him that? What makes them better positioned to say that? Are they saying that because they have a rival product?

Emmser wrote: »

Is my brother's information false? He said a lot of the teachers in his school who took out AVC's years ago are now regretting it and very angry. I understand there's three levels etc for AVC's but I'm only interested in finding out if I was in the safest level would I still essentially 'lose' money and be one of these 'angry' teachers. Thanks in advance.

Those teachers sound like they haven't done much research. I'm guessing some financial advisor rocked up to the school and told them their AVCs were rubbish and they just decided to believe it without doing any research for themselves.

Emmser wrote: »

Is my brother's information false? He said a lot of the teachers in his school who took out AVC's years ago are now regretting it and very angry. I understand there's three levels etc for AVC's but I'm only interested in finding out if I was in the safest level would I still essentially 'lose' money and be one of these 'angry' teachers. Thanks in advance.

No one here can tell you what level of AVC you have. investments in AVCs are normally at three levels, a low risk level which is normally when your money is invested in low risk products such as savings accounts and makes a small level of interest and while growth is normally steady it will be slow.

Medium level risk will give some bigger returns but also has room for larger fluctuations and the value of your investment can drop as well as rise but overall tend to rise in the medium to long term, with exceptions.

High risk investments are for what are known as aggressive investors. They produce the highest returns but also are the most volatile and if the value of your investment drops it can do so rapidly. Most teachers wouldn't have their AVCs in high risk in the latter years prior to retirement.

Emmser wrote: »

I understand there's three levels etc for AVC's but I'm only interested in finding out if I was in the safest level would I still essentially 'lose' money and be one of these 'angry' teachers. Thanks in advance.

Only your AVC provider can give you the answer to your questions. You chose the terms of your AVC when you signed up for it, so you should know what you chose or you should be able to look it up in the paperwork you signed.

Your AVC should also have sent you an annual statement showing the current value of your investment since you started making payments. Some also have online access to this information. They will also do a review of your plan with you if you ask.

There's no need to be an angry teacher if you educate yourself on the details of the plan you are investing in. Presumably if you have a car or a house you have insurance for them and know the details of what they cover. I don't see the AVC as being any different.

Emmser · 22-12-2014 12:28am

Many thanks for your knowledge. For some reason my brother, who wasn't listening intentively, believed the reason the teachers were dissatisfied was because it was revealed that they could be taxed when receiving their AVC's the day they retire. They retire at 55 receive say 150k and are then taxed on this. Would that make sense to you, their concerns?

Emmser · 22-12-2014 1:06am

Call me naive but I've just spent the past hour reading about this scheme. I'm a little confused as I was sold this scheme under the assumption i'd receive a lump sum the day I retired. After reading, Am I to understand you can only get 25% of your AVC's tax free and then you have to go about reinvesting the rest. I'm hoping I'm misinterpreting this or its for the private sector as the cornmarket representative never declared any of this. He led me to believe I'd receive a lump sum the day id retire and sail into the sunset!! Anyone any knowledge on how it works?

rainbowtrout · 22-12-2014 1:07am

Emmser wrote: »

Many thanks for your knowledge. For some reason my brother, who wasn't listening intentively, believed the reason the teachers were dissatisfied was because it was revealed that they could be taxed when receiving their AVC's the day they retire. They retire at 55 receive say 150k and are then taxed on this. Would that make sense to you, their concerns?

It depends on how many years they have done. AVCs are designed to top up a pension for teachers with a shortfall. If there's a shortfall then taxation isn't a massive problem. It is for teachers who do the full 40 years and also do an AVC. It means that the lump sum from the pension and the AVC combined go over the threshold for taxation.

Realistically those teachers should get their own financial advice personal to each of their own situations so see how they will fare out.

BTW I'm not a financial expect, i'm a teacher.

rainbowtrout · 22-12-2014 1:15am

Emmser wrote: »

Call me naive but I've just spent the past hour reading about this scheme. I'm a little confused as I was sold this scheme under the assumption i'd receive a lump sum the day I retired. After reading, Am I to understand you can only get 25% of your AVC's tax free and then you have to go about reinvesting the rest. I'm hoping I'm misinterpreting this or its for the private sector as the cornmarket representative never declared any of this. He led me to believe I'd receive a lump sum the day id retire and sail into the sunset!! Anyone any knowledge on how it works?

This comes from the Cornmarket site which is the first info I found

What are my AVC options at retirement?

At retirement your AVC Investment Account may be used within certain limits imposed by Revenue to:

Top up your gratuity with an additional tax-free lump sum and/or
Take a further taxable lump sum at retirement and/or
Provide a pension in addition to any pension you may be entitled to under the Superannuation Scheme. As with your pension under the Superannuation Scheme, any AVC pension will be treated as earned income for tax purposes and/or
Invest in an Approved Retirement Fund (ARF) assuming that your total pension income is more than €12,700 (2013 level). and/or
Purchase extra Superannuation benefits through your employer such as a refund of a marriage gratuity and/or
Buy benefits under the Notional Service Purchase (NSP) Scheme.
Needless to say most AVC members opt to take as much as possible as a tax-free lump sum.

If you retire early/ at an age where you don't make it to 40 years service (for those who go into teaching late), you don't max out the possible lump sum you can get from teaching, so the AVC can be used to top up the tax free lump sum.

If you retire with full service you would get the full lump sum from your teaching pension. If you have an AVC to add to this then it's going to bring you over the threshold and will be taxed. That's Revenue's rules kicking in, nothing to do with the broker.

You can choose rather than take the lump sum, to get an annual payment to have a regular income to supplement your teaching pension.

To the best of my knowledge you can't draw down the AVC until you draw down your teaching pension (not 100% sure on this) so if you retire early and are not eligible for teaching pension for a few more years you could use your AVC to invest in an ARF which would then be drawn down with the pension. At least I think that's the way it works.

You could be close to retirement and chose to buy back the years which are a shortfall with the AVC, which essentially means the AVC ends up combined with the teacher pension.

Again, I'm not an expert but it will depend on your own personal situation what you get out of it.

evolving_doors · 22-12-2014 9:48am

It might help if you went to another broker/company for a consultation. I'm not suggesting you switch, but just go and have a chat with another group.

Just google something like 'public sector pension providers avc' and see what companies crop up. Usually the consultation is free as long as you pretend to look interested when they mention other products after.. mortgage protection, salary protection etc. Bring along a notebook with a list of questions.

Also search askaboutmoney website (pensions section) for 'teacher avc'. Or start a new thread.

TheDriver · 22-12-2014 10:37am

Also remember that people go for promotions in their career that can bump up the salary and hence threshold. Similarly, people on 35/55 rule I.e. Pre 2004 can get a supplementary pension til 68 but I believe some brokers wont make u aware of it so it sounds like u need avcs. As other posters have said, you have a tax threshold and can use it effectively if planned. Sone People do however buy AVCs without much thought and planning

22-12-2014 11:40am

I think some of the frustration is a matter of perception - an AVC is a top up and will never be as good as a defined benefit pension and will probably be less efficient than a defined contribution scheme. It is also subject to the vagaries of the market exposing you to risk.

Do you have any service gaps you can fill in?
http://www.consumerhelp.ie/avcs

Personally I was topping up my defined contribution pension for the past few years as I had less demands on my income but at the moment I'm not paying into anything - I should get onto that.

Edit: I'm not a teacher or a pension adviser.

solerina · 22-12-2014 5:14pm

TheDriver wrote: »

Also remember that people go for promotions in their career that can bump up the salary and hence threshold. Similarly, people on 35/55 rule I.e. Pre 2004 can get a supplementary pension til 68 but I believe some brokers wont make u aware of it so it sounds like u need avcs. As other posters have said, you have a tax threshold and can use it effectively if planned. Sone People do however buy AVCs without much thought and planning

I am pre 2004 and I was told by a pension advice person who came into our school this year that this top up ceased in 2011...if this is truly the case we will be fairly hard up until we hit 68 (or whatever age the OAP will be then).
I have a reasonably decent AVC contribution built up so far

Kristopherus · 22-12-2014 5:26pm

solerina wrote: »

I am pre 2004 and I was told by a pension advice person who came into our school this year that this top up ceased in 2011...if this is truly the case we will be fairly hard up until we hit 68 (or whatever age the OAP will be then).
I have a reasonably decent AVC contribution built up so far

He was talking nonesense, as these salesmen usually do. Pre 2004 public servants retain the right to a supplementary pension to bridge the gap from retirement date to OAP age.

The main thing to remember for any thirty-somethings is that pension provisions are very likely to be revised long before you retire. That revision may result in a worsening of the current regime. Also remember that PS retirees were hit with a 7% reduction on 1st Jan 2011 and I don't see much sign of that being restored.

gaeilgebeo · 22-12-2014 5:47pm

rainbowtrout wrote: »

State Penion won't be paid out until you are 68. Not sure you can go early either as you are post 2004.
.

I started teaching in 2003.
I worked for 2 years full-time going from one maternity leave to the other.
This was pre HDip which I completed in 2005 and went straight to TWT.
My ETB are counting my 2 years unqualified as .9 of a year (or thereabouts) for service and pensionable purposes.
Will I be considered pre 2004 for the above?

rainbowtrout · 23-12-2014 12:22am

gaeilgebeo wrote: »

I started teaching in 2003.
I worked for 2 years full-time going from one maternity leave to the other.
This was pre HDip which I completed in 2005 and went straight to TWT.
My ETB are counting my 2 years unqualified as .9 of a year (or thereabouts) for service and pensionable purposes.
Will I be considered pre 2004 for the above?

You'd probably have to check with your ETB, but I would imagine that if they are giving you pensionable service for those two years then it does count. Was the service with a VEC at the time, because a Dip wasn't needed to work with the VEC, so you would have been considered qualified by the VEC but not with the Dept.

Inspector Coptoor · 23-12-2014 3:48am

Emmser wrote: »

Hi all, I'm a post primary teacher on 22 hours. I've been teaching since I was 24 and I'm now hitting 31. So my pension if I retire at 65 will be roughly 11k per year and if I retire at 55 itll be less due to penalties. I therefore set up an AVC scheme paying in about 13% of my salary with the government contributing my tax to the scheme in the hopes id be in a financial position to retire at 55. My brother whose also a post primary teacher told me they've been told that the AVC's are scams by another financial institution and you will never see the money you put into it even returned to you less alone the money the government puts in! I'm now concerned i signed up to a bogus scheme but I'm also aware because im a teacher post 2004 my pension is 11k per year until I'm 68, what should I do (and that's only if I stay teaching until I'm 65)? Is my brother's information false? He said a lot of the teachers in his school who took out AVC's years ago are now regretting it and very angry. I understand there's three levels etc for AVC's but I'm only interested in finding out if I was in the safest level would I still essentially 'lose' money and be one of these 'angry' teachers. Thanks in advance.

How could your pension be 11k pa after 41 years service?

I would have thought something closer to 35k.

My dad was a Garda for 32 years and is on a pension of 32k.

I'm having real issues with your maths OP

gaeilgebeo · 23-12-2014 10:15am

rainbowtrout wrote: »

You'd probably have to check with your ETB, but I would imagine that if they are giving you pensionable service for those two years then it does count. Was the service with a VEC at the time, because a Dip wasn't needed to work with the VEC, so you would have been considered qualified by the VEC but not with the Dept.

It was with the VEC.
Thank you for that information.

Geuze · 23-12-2014 6:04pm

Emmser wrote: »

Hi all, I'm a post primary teacher on 22 hours. I've been teaching since I was 24 and I'm now hitting 31. So my pension if I retire at 65 will be roughly 11k per year and if I retire at 55 itll be less due to penalties.

Where are you getting the 11k figure from?

Assuming 40 years conts, your pension will be half your final salary.

This will be made up of SP paid at age 68 under current laws, and occupational pension paid earlier, probably.

Geuze · 23-12-2014 6:10pm

Emmser wrote: »

. My brother whose also a post primary teacher told me they've been told that the AVC's are scams by another financial institution and you will never see the money you put into it even returned to you less alone the money the government puts in! .

AVCs are not scams.

Though they may have high charges.

The Govt does NOT put any funds into your AVC plan, it is a purely personal pension savings plan between you and an pension fund.

feardeas · 23-12-2014 10:24pm

D'ont think the occupational pension could be 11k. Assuming full service the pension is half you finishing salary. That would mean finishing at 22k. Sure even post 2012 entrants start at better.

Now afaik the pension will be made out roughly as follows half finishing salary - state pension. There will be a shortfall of the state pension (currently 12,000 five or take) from 65 to 68. 11 + 12 = 23k. Even at that would mean retiring on a salary of 46k. Again I just dont think anyone in teaching at full service would retire at that level. I'm a post 04 entrant [just about] and nearly had heart failure reading the post until i thought it out. Used to have AVC, was sweet talked into taking them out. I gave them up the time the pension levy came in as i couldn't afford them. From listening to friends in the private sector, including my partner, who are very well paid, salaries I'll never see their pension entitlements , non guaranteed as it is defined contribution, our pension scheme is very good. Mind you when you do the sums i reckon i pay 11% inclusive of the pension levy so I'm not going to be apologetic over that. Rambling a bit here and its 32 years before i'll be getting it.

Emmser · 23-12-2014 11:02pm

These are the pensions. I am sure of my figure. I'm post 2004. It's roughly 11k if I retire at 65 after working 40 years but then by 68 I'll get the state pension too. So that'll bring it up. If I retire at 55 my pension will be reduced by 58.2% so what's 41.8% of 11k?!

Emmser · 23-12-2014 11:07pm

I imagine your pre 2014 so you're probably okay. I'm not unfortunately. And yes you're right, I'll end up on 23k at 68. This is assuming the information that my financial advisor gave me is correct. But it was discussed amongst our staff also and everyone had the same figures.

An Bradán Feasa · 23-12-2014 11:09pm

Emmser wrote: »

These are the pensions. I am sure of my figure. I'm post 2004. It's roughly 11k if I retire at 65 after working 40 years but then by 68 I'll get the state pension too. So that'll bring it up. If I retire at 55 my pension will be reduced by 58.2% so what's 41.8% of 11k?!

If you retire after 40 years, that's forty eightieths of your final salary (40/80 i.e. half) for the purposes of your pension. For the sake of argument let's say your final salary is 60k, your pension will be 30k. At 68 you can then throw the state pension on top of that.

I have no idea where you're getting 11k from!

Emmser · 23-12-2014 11:18pm

An Bradán Feasa wrote: »

If you retire after 40 years, that's forty eightieths of your final salary (40/80 i.e. half) for the purposes of your pension. For the sake of argument let's say your final salary is 60k, your pension will be 30k. At 68 you can then throw the state pension on top of that.

I have no idea where you're getting 11k from!

I honestly wish it wasn't 11k but I'm telling you, we had a financial consultant into our school with individual meetings with all staff. Pre 2004 I think were told their pension would be 28k (I think) and any of us that were post were 11k. (This is all if you retire at 65 after forty years service). Those new entrants that joined after the wage cuts were told it would be less. We were all shocked and horrified too. I doubt this man could give our misleading information. He works for Cornmarket. I didn't mean to cause such out roar on this forum, I merely wanted to know if AVC's were a good option for me.

feardeas · 23-12-2014 11:24pm

I'm not an expert but I'd be shocked of he was right. I'm post 04. It could be a ploy to encourage avc. I'll be contacting my union after the holidays.

Other thing might be that he was talking net but even at that I'd say it's less than what it would be.

Emmser · 23-12-2014 11:38pm

feardeas wrote: »

I'm not an expert but I'd be shocked of he was right. I'm post 04. It could be a ploy to encourage avc. I'll be contacting my union after the holidays.

Other thing might be that he was talking net but even at that I'd say it's less than what it would be.

Our Union rep was horrified when I told her my situation and she contacted TUI. I think the 11k was net and was an attempt to shock me, which it did. I've looked up this and I think you'll be able to read about the OACP that I think might be responsible but really I don't have a clue what the words or figures mean, perhaps you might be able to figure it out: I can't seem to post URL but look up TUI circulars post 2004 and you'll find it there. It says: "Pension will be payable at the rate of 1/80th of co-ordinated retiring pay for each year of service, subject to a maximum of 40 years’ service. Co-ordinated pay is pay less twice the maximum personal rate of Old Age Contributory Pension. Twice the maximum personal rate of OACP is, currently, €17,459.43."
At this stage I've my fingers and toes crossed hoping I'm wrong and you are all correct! It would make my Christmas! If it is the case, I'll be looking for heads rolling in corn market!! Lol.

man_no_plan · 24-12-2014 2:02am

http://www.cspensions.gov.ie/modellers.asp

Have a look here!

Geuze · 24-12-2014 2:11am

Emmser wrote: »

These are the pensions. I am sure of my figure. I'm post 2004. It's roughly 11k if I retire at 65 after working 40 years but then by 68 I'll get the state pension too. So that'll bring it up. If I retire at 55 my pension will be reduced by 58.2% so what's 41.8% of 11k?!

If you retire on 60k gross, your pension will be 12k State Pension SP, and 18k work pension.

Bear in mind that the AVC salesman is biased - they are trying to sell you something.

Ask them to put the 11k in writing, and then post the details on here.

TheDriver · 24-12-2014 2:12am

An Bradán Feasa wrote: »

If you retire after 40 years, that's forty eightieths of your final salary (40/80 i.e. half) for the purposes of your pension. For the sake of argument let's say your final salary is 60k, your pension will be 30k. At 68 you can then throw the state pension on top of that.

I have no idea where you're getting 11k from!

Complete crap. You get 40/80 presuming 40 years but as op had said, its coordinated so old age pension is taken off it which you get at 68. Until 68 you should get a supplementary pension which has same value.
Unfortunately insurance companies scare people with lack of facts....

Geuze · 24-12-2014 2:12am

An Bradán Feasa wrote: »

If you retire after 40 years, that's forty eightieths of your final salary (40/80 i.e. half) for the purposes of your pension. For the sake of argument let's say your final salary is 60k, your pension will be 30k. At 68 you can then throw the state pension on top of that.

I have no idea where you're getting 11k from!

This is incorrect.

The two pensions are integrated.

You will NOT get a 50% work pension plus a SP on top.

Geuze · 24-12-2014 2:13am

Emmser wrote: »

I doubt this man could give our misleading information. He works for Cornmarket. I didn't mean to cause such out roar on this forum, I merely wanted to know if AVC's were a good option for me.

Do not trust salespeople.

Get everything in writing.

They are on large commission, they are out to sell you something.

Do your own research.

Geuze · 24-12-2014 2:16am

Emmser wrote: »

Our Union rep was horrified when I told her my situation and she contacted TUI. I think the 11k was net and was an attempt to shock me, which it did. I've looked up this and I think you'll be able to read about the OACP that I think might be responsible but really I don't have a clue what the words or figures mean, perhaps you might be able to figure it out: I can't seem to post URL but look up TUI circulars post 2004 and you'll find it there. It says: "Pension will be payable at the rate of 1/80th of co-ordinated retiring pay for each year of service, subject to a maximum of 40 years’ service. Co-ordinated pay is pay less twice the maximum personal rate of Old Age Contributory Pension. Twice the maximum personal rate of OACP is, currently, €17,459.43."
At this stage I've my fingers and toes crossed hoping I'm wrong and you are all correct! It would make my Christmas! If it is the case, I'll be looking for heads rolling in corn market!! Lol.

Pension is (1/80)(years of service)(co-ordinated wages)

So if you have 40 years paid in, then the pension is: (40/80)(co-ordinated pay)

Co-ordinated pay = Gross less 2* OACP.

Say you retire on 60k, so co-ordinated pay = 60 - 2(12) = 36k.

Half of this is a work pension of 18k.

Add in the SP 12k gives you 30k.

Which is half of your final salary.

An Bradán Feasa · 24-12-2014 9:50am

TheDriver wrote: »

Complete crap. You get 40/80 presuming 40 years but as op had said, its coordinated so old age pension is taken off it which you get at 68. Until 68 you should get a supplementary pension which has same value.
Unfortunately insurance companies scare people with lack of facts....

Christmas really brings out the best in people.

So I might have been a bit off with my figures, here's what I found afterwards in Circular 10/04, which is pretty much what others are saying:

Pension will be payable at the rate of 1/80th of co-ordinated retiring pay for each year of service, subject to a maximum of 40 years’ service. Co-ordinated pay is pay less twice the maximum personal rate of Old Age Contributory Pension.

Either way, the OP's pension, based on today's figures, won't be 11k.

AVC's Secondary School Teacher

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