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AVC's or buying back notional years

  • 30-04-2019 09:00PM
    #1
    bisset
    Registered Users, Registered Users 2 Posts: 440 ✭✭


    I reckon I will have 35 years of service on retirement in public sector.

    In general terms what is the difference between AVC's and buying back years?


Comments

  • #2
    Henry Ford III
    Moderators, Business & Finance Moderators Posts: 18,197 Mod ✭✭✭✭Henry Ford III


    AVC is an investment vehicle. Investment risk is yours.

    Added years is the equivalent of an annuity. You are buying certainty of benefit.

    They are quite different.


  • #3
    leinster93
    Registered Users, Registered Users 2 Posts: 329 ✭✭leinster93


    bisset wrote: »
    I reckon I will have 35 years of service on retirement in public sector.

    In general terms what is the difference between AVC's and buying back years?




    You may find the attached useful...provided by the pension authority.


  • #4
    bisset
    Registered Users, Registered Users 2 Posts: 440 ✭✭bisset


    leinster93 wrote: »
    You may find the attached useful...provided by the pension authority.

    Thanks for that


  • #5
    baldardash
    Registered Users, Registered Users 2 Posts: 3 ✭baldardash


    Re Notional service v Avc's. I've 7 yrs to make up to retire with full benefits at 60. Notional service is €490 fortnightly gross. Cornmarket Avc quote is €260 fortnightly gross. My head is wrecked. Ns feels like i'll be paying tens of thousands and might only recoup a fraction of it. Avc's frighten me as they could be worth little or nothing when the time comes. I've read up on both and can't make up my mind. Might it not be better to save the fortnightly amounts in the bank/credit union and have no headache?


  • #6
    baldardash
    Registered Users, Registered Users 2 Posts: 3 ✭baldardash


    Re Notional service v Avc's. I've 7 yrs to make up to retire with full benefits at 60. Notional service is €490 fortnightly gross. Cornmarket Avc quote is €260 fortnightly gross. My head is wrecked. Ns feels like i'll be paying tens of thousands and might only recoup a fraction of it. Avc's frighten me as they could be worth little or nothing when the time comes. I've read up on both and can't make up my mind. Might it not be better to save the fortnightly amounts in the bank/credit union and have no headache?


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  • #7
    killbillvol2
    Registered Users, Registered Users 2 Posts: 5,182 ✭✭✭killbillvol2


    baldardash wrote: »
    Re Notional service v Avc's. I've 7 yrs to make up to retire with full benefits at 60. Notional service is €490 fortnightly gross. Cornmarket Avc quote is €260 fortnightly gross. My head is wrecked. Ns feels like i'll be paying tens of thousands and might only recoup a fraction of it. Avc's frighten me as they could be worth little or nothing when the time comes. I've read up on both and can't make up my mind. Might it not be better to save the fortnightly amounts in the bank/credit union and have no headache?

    What's the AVC quote to cover? How many years til you retire?

    As I understand it if you buy notional service that's it, you've covered the gap. You know what you're getting at the end.

    The AVC is invested in a fund and obviously has a risk. At your retirement I take it you want to bump your pension up to the max. In that case you'll be depending on your AVC fund (which is now put in an ARF) to provide an annuity to supplement your pension. Currently the annuities payable on funds like this are very low and I'd say there's no chance it would fill the gap.

    In any case you need proper financial advice given the sums involved.


  • #8
    AnRothar
    Registered Users, Registered Users 2 Posts: 752 ✭✭✭AnRothar


    Retirement at 60 depends on a lot of things.
    One of which is where do you work?
    baldardash wrote: »
    Re Notional service v Avc's. I've 7 yrs to make up to retire with full benefits at 60

    Assuming civil/public service for a minute.
    And not one of the specified groups (Garda for example).

    Retire at 60 is a moveable feast.

    From the pdf linked above
    "Public servants who will have the maximum service allowable at
    retirement age cannot avail of PNS. So if at normal retirement age
    you will have 40 years service, you will not be able to avail of PNS."


    Magic word is NORMAL Retirement age.

    Its usually that you can retire at 60 with conditions.
    One of which is that you must have worked the 40 years before reaching your 60th birthday.
    Otherwise you continue working to 65 or reaching the 40 years service target.


    "As I understand it if you buy notional service that's it, you've covered the gap"

    Potentially the most "added years" you can buy is 2 (65-60 =5 => 7-5 = 2).


    Speak to your HR or your union to find out what your NORMAL retirement age is.


  • #9
    Portsalon
    Closed Accounts Posts: 687 ✭✭✭Portsalon


    baldardash wrote: »

    Might it not be better to save the fortnightly amounts in the bank/credit union and have no headache?

    That would mean you'd be investing your after-tax income and not being able to avail of the attractive tax reliefs available if you opt to go AVC or Notional purchase. Not good!

    For me Notional Purchase is the better way to go - especially if you're married, as you'll be enhancing your spouse's pension too after you move on to the next world.


  • #10
    killbillvol2
    Registered Users, Registered Users 2 Posts: 5,182 ✭✭✭killbillvol2


    AnRothar wrote: »
    Retirement at 60 depends on a lot of things.
    One of which is where do you work?


    Assuming civil/public service for a minute.
    And not one of the specified groups (Garda for example).

    Retire at 60 is a moveable feast.

    From the pdf linked above
    "Public servants who will have the maximum service allowable at
    retirement age cannot avail of PNS. So if at normal retirement age
    you will have 40 years service, you will not be able to avail of PNS."


    Magic word is NORMAL Retirement age.

    Its usually that you can retire at 60 with conditions.
    One of which is that you must have worked the 40 years before reaching your 60th birthday.
    Otherwise you continue working to 65 or reaching the 40 years service target.


    "As I understand it if you buy notional service that's it, you've covered the gap"

    Potentially the most "added years" you can buy is 2 (65-60 =5 => 7-5 = 2).


    Speak to your HR or your union to find out what your NORMAL retirement age is.

    I would assume as they have a quote from Cornmarket that they're public sector. I'm also assuming that they've investigated buying notional service and can do so as they've been given a cost by the employer.

    After that the normal retirement age will depend on when they entered service. They clearly stated that they won't have 40 years service at 60.


  • #11
    baldardash
    Registered Users, Registered Users 2 Posts: 3 ✭baldardash


    Thanks AnRothar..for me, sec teacher, i can go at 60.


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  • #12
    AnRothar
    Registered Users, Registered Users 2 Posts: 752 ✭✭✭AnRothar


    baldardash wrote: »
    Thanks AnRothar..for me, sec teacher, i can go at 60.
    I would go for the added years as it guarantees certainty. But that's me.


    Get proper advice tailored to your circumstances.


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