AVC Pensions

What are Additional Voluntary Contributions (AVCs)?

Additional Voluntary Contributions or AVCs are extra savings which you can make towards your pension.

What are the benefits of making AVCs?

Additional Voluntary Contributions are a very tax efficient way of saving for your future. AVC pensions contributions are treated the same as normal pension contributions for tax purposes, so you qualify for tax relief at your highest rate of tax.

Based on the example above, if you decided to make an AVC of €100 and you are on the 41% rate of tax, you would receive tax relief at 41%. That means a €41 saving for you!

Any growth on your AVC pension fund investment funds is also tax free.

Additional Voluntary Contributions (AVCs) are very flexible

• AVC pensions allow you to vary the amount you are contributing and you can even cease making AVC pension contributions at any time.
• Your AVC pension benefit must be administered in the same way and at the same time as your retirement benefits under your main pension scheme. If you leave your company, you can leave your AVC pension fund invested until retirement or transfer to your new employer’s pension fund, or a Personal Retirement Bond (PRB) which is a personal policy purchased by the trustees in your name (subject to scheme rules).
• You can choose to retain control of your fund post retirement in an Approved Retirement Fund (ARF), which is a tax-free investment fund held in your own name and managed by a Qualifying Fund Manager (subject to certain conditions). This means your AVC pension remains invested on a tax-free basis until you need to access it. You will need to pay tax on the withdrawals as if it was income.

What can I use my AVC pension fund for?

Tax-free lump sum

This is a very tax-efficient way to maximise your benefits. All scheme members should consider building up an AVC pension fund at least as big as their expected tax-free lump sum.

Increase your pension amount in retirement

If you have low expected pension benefits, AVCs can be a great, tax-efficient way to increase your overall retirement income. They can also boost your pension if you would like to retire early.

How do I make AVCs?

Group pension scheme members can make AVCs. The process is simple. When you decide to make AVCs and the amount you would like to contribute, complete an application form and give it to your payroll department. Your AVCs will then be deducted directly from your salary, so you get full tax relief at source. You can also make once-off payments by cheque and then apply to the Revenue for your tax back.

What conditions apply when accessing my AVC pension fund?

The Government have established generous limits which apply to your total contributions. However a maximum earnings limit* also applies. The table below displays the percentage of your income that you can receive tax relief on when contributing to a retirement fund. There are also limits on the benefits that may be provided at retirement.

*Note: In any tax year employee contributions are limited according to age and are subject to Revenue approval. This is shown in the table above. This includes any contributions to your main scheme. The maximum earnings limit for tax relief on pension contributions for 2011 is €115,000. The Revenue Commissioners have also placed limits on the total amount that can be contributed by you and your employer to the occupational pension plan.

What scope do I have for making AVCs?

Normally the retirement benefits which are payable under the rules of your main company pension plan are lower than the maximum benefits which are permitted by the Revenue Commissioners. Therefore, most people have scope to pay AVCs to increase their retirement benefits without the risk of breaching Revenue maximum benefits rules. For example, some of your earnings may not be included in the calculation of the pension amount payable from your main plan - e.g. overtime, bonuses, commissions or car allowance or you may have entered your pension plan at an age when you are not expected to receive full pension benefits from your company’s main pension plan when you retire.

It’s not too late to start making a difference to the quality of your retirement

If you are over 50 years of age, it is important that you start to take control of your pension now. The generous tax relief on contributions of up to 40% of total earnings makes it easier to do this. If any of the following situations apply to you, then it is even more important that you consider making extra provisions for your retirement:

• You will have less than full pension at normal retirement age (typically, 40 years service).
• There is a possibility that you may retire before 65 for health/personal reasons (as people are increasingly doing).
• You wish to provide an enhanced pension for your family.

If I decide to make AVCs what information will I get?

Irish Life Corporate Business will provide an annual pension benefit statement that will give the current value of your account and will show the transactions over the previous year. We can also provide a pension phone service to allow you to access your fund value by means of a Personal Identity Number (PIN). An internet service (Pension Planet Interactive) also allows you to access AVC pension fund values, check your contribution online and complete projections using different retirement saving scenarios.

If you are interested in making AVCs, please contact your payroll department, broker or financial advisor.

WARNING: If you invest in this product you will not have any access to your money until your retirement date.

WARNING: The value of your investment may go down as well as up.

WARNING: The income you get from this investment may go down as well as up.

WARNING: The value of the fund may be affected by changes in currency exchange rates.

WARNING: If you invest in this product you may lose some or all of the money you invest.