AVC/PRSA

chases0102

Hi all,

Can anyone recommend an AVC/PRSA broker/company? Other than Cornmarket.

Thanks.

gaiscioch

LA Brokers in Newcastle/Greystones in Wicklow (https://www.labrokers.ie/avc-for-public-private-sector/) are a discount broker but you'd have to know your AVCs as they don't offer advice but are significantly cheaper.

As I didn't know anything about AVCs at the time, I used the PSRA (Public Sector Retirement Advisors) broker in Maynooth and they moved me from Cornmarket/Irish Life to a Zurich PSRA/AVC (https://www.expertadvice.ie/about-us).

chases0102

Many thanks for that.

I find the execution-only AVCs daunting and slightly intimidating - however they are a lot more beneficial in terms of overall cost of the AVC. I wonder is there anywhere that could guide me through the initial process, even for a fee? The paperwork and revenue side seem tricky.

Treppen

https://www.boards.ie/discussion/comment/120101837#Comment_120101837

Yes PSRA are good and cater for teachers so you'll get looked after. LA is probably the best value but it's a case of "here's the form, send it in , goodbye".

Of course Cornmarket will set it up through your payslip so don't have to claim back from revenue and it's done automatically. I went with execution only with Cornmarket just for that reason.

I used to have an old PRSA before teaching and had to claim back every following year, really it was very little hassle and you can leave it for 2 years then claim back a nice chunk which I saw as a form of savings.

Geuze

https://www.boards.ie/discussion/comment/120101837#Comment_120101837

The application form (below) seems reasonably straight forward?

https://www.labrokers.ie/wp-content/uploads/2022/08/Standard-PRSA-AVC-01-Aug-2022.pdf

chases0102

Thanks for all the advice here folks.

I am about to go with an execution-only, 100% allocation 1% management fee option.

Clearly it is the cheapest, but have no access to advice. Slightly daunted by this matter but have been reassured by people that I can seek advice, and pay for it, in time when I need it.

Geuze

Daunted by what?

Claiming the tax relief?

Choosing the funds?

chases0102

Choosing the funds, and understanding whether I am under-funding to reach my goal (say, a retirement with a specific age in mind) or even over-funding an AVC (how to be most tax-efficient).

Probably overthinking it and worrying for nothing but they would be my concerns.

acequion

This thread has been inactive for a month but as I'm in a similar dilemma re AVCs and have posted over in the Business/Pensions forum I thought I'd input here as well and hopefully my experience will be of some help.

OP, did you get sorted? I hope you went with the execution only PRSA. I did that a few years ago. A local broker in my town set up one for me with Zurich. It was only a small one as I was already buying back a lot of my shortfall through Notional Service. I was paying in to the AVC for bout 4-5 years and stopped on the advice of the PSRA Maynooth advisors that you mention. But for those 5 years paying my AVC I had no problem whatsoever. I found it simple to set up the tax relief with Revenue which went smoothly and imagine that the main advantage in going with Cornmarket is that they arrange it all for you, calling it a Pay slip AVC but charge a big fee.

My dilemma now is that I had a free consultation yesterday with a Cornmarket rep as I'm now just a year away from retirement. This guy said I was mad to stop the AVC and urged me to start a new one. Now I get that a lot of this is big sales pitch as he was urging me to do a back dated one for last year [I'm not going to do that] and a pay slip one for the 18 months left. Again he was pushing for big sums. But I'm wondering if I should do a pay slip one as it's a cost effective way of saving, with 40% paid by the State in the tax relief, and then on retirement invest in an ARF? I got completely different advice from the PSRA people who said to stop the AVC as they reckon the fees and charges aren't worth it and invest my savings later. At the moment I've a nice bit of cash sitting dormant in savings and really don't know whose advice to take. Any suggestions? Thanks so much.

Treppen

Why did PSRA advise to stop the AVC?

amacca

https://www.boards.ie/discussion/comment/120280405#Comment_120280405

I would wonder the same tbh.....perhaps if one has near full service on retirement (due to purchase of notional service in this case) there would be little benefit to purchasing an avc?

Treppen

https://www.boards.ie/discussion/comment/120281114#Comment_120281114

Just out of curiosity, why does having an AVC with near full service not benefit you?

I've heard a few people say that's they were advised to stop their AVC as it wouldn't be of benefit but I've never understood why. Like you are still getting (potentially) 40% relief on the AVC contribution.

amacca

https://www.boards.ie/discussion/comment/120282474#Comment_120282474

I have to preface this with a disclaimer because the truth is I don't know yet....but I'd dearly like to know.

My thinking (probably flawed) is as follows...

An AVC is there primarily to fill the gap between what your full pension would be and what it will be reduced to if you retire before having reached full service....it therefore seems most beneficial for those that want to retire before full service is reached (because they started late or they just cant see themselves being able to cope at 65/68 whatever)...and that's perhaps who it's best suited for?

As the poster mentioned they bought back years service....normally you do that if you don't or wont need to buy back that many on retirement?? (ie: you are close enough to full service as its bloody expensive as I understand it and theres a limit to how much you can buy) ....so if that's the case then maybe the AVC brings very little benefit beyond being a retirement savings scheme as the existing pension benefit (with the purchase of notional service) is near the marginal tax limit?

To me the two big reasons for the AVC are 1) the tax relief at the higher rate on contributions 2) whatever growth and compunding takes place over the lifetime of the investment ......

.the tax relief is great but if you are already at a level near the end of a career (with full 40 years service or whatever it is) that your pension earnings will be close to a limit where the govt starts taxing what you draw out of it at the high rate then maybe that negates the big benefit of the tax relief on contributions?

If that were the case you might see better returns from other investments and be able to access them before you retire??....albeit that is difficult with tax treatment of ETFs in this country and outlier bullshit like deemed disposal rules...

Tbh I would love to find a good truly independent fee based advisor to wear the ear off when it comes to optimum strategy for this sort of stuff...my situation is very complicated to say the least and a lot of what's out there have their own axe to Grind (tied/commission based or just plain lazy and incompetent - I've received some good advice at times from surprising sources and some pretty poor stuff from sources that should be better....it 100%always pays to DYOR on anything that anyone advises you to do before acting on said advice in my experience)

Treppen

Thanks for that. My own situation is a bit complicated too , PRSA with previous private sector + not having full years service so also took out AVC.

The problem is I've done so much random subbing for about 12 years before CID that I don't know the overall contribution (luckily I didn't break my service with the department for this year's, so I'm still in previous pension scheme to the current).

Is there someone I can contact in the department who will get the lovely job of calculating my random contributions.... Presume it takes about 20 years for them to do it 😁

am_zarathustra

https://www.boards.ie/discussion/comment/120284753#Comment_120284753

I had to do this going from Dept to ETB, mad system, they print you the whole thing, for 4 years it was massive but it comprehensive and they had it out quick enough. Etb's new online system should have all your hours and the amount of pension contributed on it, handy enough in fairness.....though the retirement date thing is a bit scary.

Geuze

If a public servant has the full 40 years pension contributions, there is less scope to do AVCs.

This may help:

https://www.askaboutmoney.com/threads/understanding-scope-for-avcs-in-integrated-defined-benefit-pension.220846/

• Additional Voluntary Contributions (AVCs) exist as a mechanism to supplement the benefits received under an existing occupational pension scheme where these are less than the maximum pension benefits allowed under Revenue rules. AVCs cannot be made unless someone is a member of an existing occupational pension scheme.
• Revenue's rules around the maximum benefits that can be received under an occupational pension scheme are contained in their pensions manual, which distils many of the rules from the Taxes Consolidation Act.
• The general rule for occupational pension schemes is that they cannot exceed 2/3 final salary. There are multiple variations as to how 2/3 salary can be reached depending on the kind of pension e.g. defined contribution or defined benefit.
• The maximum benefits that someone can receive under their pension will be reduced if they retire early.
• If a defined benefit occupational pension scheme has a 1.5x Final Salary Tax Free Lump sum, the maximum pensionable remuneration allowable under revenue rules for that scheme (according to actuarial calculations) will be 40/80s of final salary, or half of final salary. What constitutes "Final Salary" is again determined through actuarial calculations.
• An Integrated defined benefit pension is one which has regard to the current levels of State Pension in calculating the benefits gained under the scheme. The current pension scheme for new entrant public servants - the Single Public Service Pension Scheme - is an integrated scheme.
• While an integrated defined benefit pension scheme might have regard to the State Pension in assessing what benefits are made available under the scheme, the State Pension itself is not relevant for calculating whether the maximum benefits under revenue rules have been reached. In other words: in assessing scope for AVCs in such a scenario, the State Pension should be ignored and if the scheme pays less than 50% final salary, an AVC pot can be used to make up the deficit.
• Income Tax relief is granted on pension contributions at the individual's marginal rate (e.g. 20% or 40%). Relief is not granted on USC and PRSI.
• The amount that can be contributed to an AVC in any given year is capped by revenue as a percentage of salary in various age brackets.
• If you're paying 40% income tax now and expect to be below the 40% income tax threshold in retirement, pension contributions are an absolute no brainer as this is "true" tax relief. Even where total pensionable remuneration in retirement is expected to exceed the 40% income tax threshold, and is likely to be hit by USC again on the way out, making pension contributions up to revenue limits is likely to be a financially advantageous way to invest because a pension:
  • is the only readily accessible way to invest in collective investment vehicles for equities in Ireland without suffering the approx 30% long term hit to growth from the deemed disposal rule without having to deal with accountants and form 11s for the rest of your life;
  • gains compounding benefits not available in any other investment product from the "loan" of income tax from revenue - as outlined in Marc's post on the first page of one of the key posts in this forum.
• It's extremely important not to over-invest in AVCs by exceeding revenue rules for pension benefits in the short term (by over-contributing each year) or in the long term (by over saving). The benefits gained under your occupational scheme will be reduced to compensate in the event you over-fund your AVC pot, and revenue might claw back tax relief on any excessive contributions.

amacca

https://www.boards.ie/discussion/comment/120285760#Comment_120285760

Thank you, that's actually quite helpful...I didn't know the state pension is not relevant for calculating whether max benefit has been reached under revenue rules either!

Treppen

Thanks as always Geuze.

so if I'm reading this correctly, the amount I put in with AVC must not exceed 2/3 of final salary! Am I reading that correctly!

Geuze

It's not the contributions to an AVC fund that are restricted, it is the future pension benefits.

See here:

https://www.revenue.ie/en/tax-professionals/tdm/pensions/chapter-06.pdf

Geuze

Example: PS hired pre-April 1995

PS pension = 50% of former salary

Lump-sum = 1.5x final salary

The lump-sum is worth (150% / 9) = 16.67% of salary.

So total benefits are 50 + 16.67 = 66.67% of salary.

So no scope to do AVCs, as you are at the Revenue max already.

However, even for a PS with full 40 years service, there is still usually scope to do an AVC.

Brokers on AAM have stated this repeatedly.

I think this is because the spouse/childrens pension can be enhanced, although I'm not totally clear here.

newhouse87

Is it simply that a person doesn't want there avc pot to go over 200k or 500k? My very basic understanding is that up to 200k i can take lumpsum tax free and between 200-500k its 20%. After that its tax at your marginal rate most likely 40%. Is that too basic an understanding?, slightly concerned as im paying in 20% now as have cash free and not many expenses but don't want to go over any limits. 34 years old.

gaiscioch

Is anybody paying only a 0.8% fee/charge for their pension per year?

'Irish pension charges ‘good value’ at 0.8%, says Insurance Ireland Insurance Ireland suggests that plan for auto enrolment will put downward pressure on pension charges': https://www.irishtimes.com/business/2023/06/16/irish-pension-charges-good-value-at-08-says-insurance-ireland/

Here's Cornmarket published fees and charges for AVCs for TUI members, and they're nothing like 0.8% - and it doesn't help that they're being obscurantist about all the charges rather than just giving a final figure for the annual charge: https://www.cornmarket.ie/uploads/12748_Update_AVC_charge_statements_11-17_rebranded_TUI.pdf

Geuze

Yes, I have seem AMCs of 0.65% and 0.75%, but bear in mind these plans typically have contribution charges also.

Here are a few brokers to compare.

LA brokers, Wicklow, execution-only, no advice, sells Zurich AVC

https://www.labrokers.ie/prsas-ireland-personal-retirement-savings-account-pension-plan/

100% allocation / 1% AMC

www.prsa.ie, Tipp, execution-only, no advice, sells Zurich AVC

100% allocation / 1% AMC

New Ireland, Galway agent, much higher contribution charges, but lower AMC

Geuze

I have seen a few AVC with Cornmarket at 595 set-up fee / 100% allocation / 1% AMC.

See this one for example:

https://cornmarket.cdn.prismic.io/cornmarket%2F9664aa53-335c-47e3-b5af-deca11cb6534_14010+avc+charges+statement+-+irish+life+multi_11-18_form.pdf

Geuze

Are you sure that your TUI fees are up-to date?

https://cornmarket.cdn.prismic.io/cornmarket%2F9664aa53-335c-47e3-b5af-deca11cb6534_14010+avc+charges+statement+-+irish+life+multi_11-18_form.pdf

Geuze

These rates are from Nov 2018

I see TUI on the list.

595 set-up fee, 100% allocation, 1% AMC.

Cairnq1

if you are married it is almost impossible to over fund AVC's.

The maximum pension for public sector employees is 1/2% of salary & maximum spouses pension is 1/4 of salary. Revenue maximum is 2/3 of salary and maximum spouses pension is the same i.e 2/3 of your own salary. So.... as a public sector employee you can use AVC's to fund for extra spouses pension benefits up to the revenue max. But when you come to retirement you don't have to opt for spouses benefits and can transfer the AVC fund to an ARF.

Probably the most relevant question as to whether or not AVC's are worthwhile is if you and spouse have a combined guaranteed pension income in excess of €80K? If so, then the tax releif at the top rate will be allowed on the AVC contributions but also charged on the ARF withdrawals. So the only asdvantage to AVC's in this case is if you retire with less than full service you can fund for shortfall in tax free lump sum.