Company pension schemes can sometimes provide lower benefits than the maximum allowed. In recognition of this, the Revenue Commissioners give tax relief up to certain limits to encourage members of company pension schemes to top-up their pension benefits.
These benefits can be increased by making Additional Voluntary Contributions (AVC's).
How do they work?
If you are in a pension scheme at work and wish to invest more money into your retirement planning, you can either pay into your main scheme at work or a Personal Retirement Savings Account (PRSA). These contributions become known as AVCs.
If you decide to pay AVC's into a PRSA and if you leave your employer’s pension scheme in the future, it is possible to continue making contributions into your PRSA. If you don’t join another employer-sponsored pension scheme at work, these would be considered PRSA contributions rather than AVCs.
Do I need an AVC?
Before looking at the AVC arrangements which may be available to you, you should assess whether you actually need to pay AVC's. To assess your retirement needs, you should find out what you will be entitled to when you retire.
This includes not just benefits from your current employment but also any pension benefits accumulated from previous employments. If a shortfall exists and you would like to top up your benefits, you may be eligible to pay AVC's.