What is an AVC?
Most of us have cast a thought about what life will be like when we stop working and retire. The reality is that people are living longer and when we reach retirement, we not only want to maintain our current standard of living; we also want to be able to enjoy all the things that we can do with the extra free time!
For some, the standard Public Sector pension (Superannuation Scheme) may adequately serve these needs; but for others, some additional planning and forecasting or a ‘top-up’ may be required.
This is where the Cornmarket AVC Scheme comes in. Designed for Public Sector employees like you, and with tens of thousands of existing members, the AVC Scheme allows you to build up additional savings now, in a very tax efficient manner, for use at retirement to top up your employer pension benefits e.g. to maximise your tax-free lump sum.
Two very real reasons why an AVC makes financial sense:
- You get greater flexibility in retirement particularly if you want more financial freedom, more money in retirement, or want to retire early
- You get immediate tax relief from Revenue now through your payslip, so really the Government makes a contribution too! In fact, you could get back €40 (assuming you are paying income tax @ 40%) for every €100 you invest in your AVC plan (subject to Revenue limits).
Check out our video for an easy explaination of how an AVC works!
Why is an AVC Plan right for me?
Additional Voluntary Contributions (an AVC) are contributions you make to build up an additional retirement fund. When you retire, this AVC fund can be used to top up your employer pension benefits, within Revenue limits. An AVC makes financial sense if you fall into one or more of the following three categories:
- You want more financial freedom at retirement
- You want to retire early
- You have a shortfall in Superannuation Benefits at retirement.
You decide the level of AVC you want to pay, within certain Revenue limits. Your AVCs are then invested in investment funds. At retirement, your AVC fund is used to top up your retirement benefits. You can decide how you use your AVC fund, within certain restrictions.
You can use your AVC fund to top-up your tax-free lump sum to the level allowed by Revenue. You may be able to transfer any balance to an Approved Retirement Fund (ARF) which you can draw on in retirement, or buy an annuity.
Cornmarket is the market leader in Ireland when it comes to Public Sector AVCs. Cornmarket’s AVC Schemes benefit from a number of unique and innovative features which set them apart from the typical AVC Scheme.
Retirement Benefits of an AVC
At retirement you use the money in your AVC investment account to 'buy' whatever extra benefits you want subject to the overall limits imposed by the Revenue. The greater the size of your AVC investment account at retirement the greater the amount of benefits you will be able to buy. The main benefits may include:
- An extra tax free lump sum (gratuity)
- An investment in an Approved Retirement Fund (ARF) / Approved Minimum Retirement Fund (AMRF)
- A further taxable lump sum
- An additional pension for you in retirement
- An additional pension for your dependants if you die after retirement
- 'Buying' missed years of service through the Purchase of Notional Service (PNS) Scheme*
- An option to buy employer benefits e.g. repaying a marriage gratuity or paying outstanding Spouses' and Children's Scheme contributions*.
You can also use your AVC plan in the years prior to retirement to provide additional benefits for your family in the event of your death. These benefits include:
- A death benefit of up to 2 ½ times your annual salary
- An additional pension for your dependants.
*These must be bought prior to your retirement.
Increase your AVC contributions online
Four good reasons to increase your AVC contributions
- Lighten your tax bill and increase your retirement savings
- The bigger your AVC pot the more options you have at retirement
- Retire earlier than you originally planned.
- You may have taken advantage of the once-off option to withdraw up to 30% of the value of your AVC
How can I increase my AVC contributions?
You have two options when it comes to increasing your AVC contributions, and there is currently no charge for either option.
- Book a complimentary appointment with one of our Retirement Planning Consultants to review your AVC. Call (01) 408 4025
- Increase your monthly contributions using our online form
If you decide to increase your AVC contributions without meeting a consultant, please ensure that you review our booklet ‘Information on increasing your AVC contributions’ - click here
Last Minute AVC
If you are nearing retirement and your gratuity under the Superannuation Scheme is likely to be less than the maximum allowed under Revenue rules because you:
- Have received a reduction in salary over the last few years, even if you have full service and/or
- Are short service and/or
- Have non-pensionable earnings.
There is a special tax break under Revenue rules that you might be able to take advantage of before you retire. This is known as a Last Minute AVC.
What is a Last Minute AVC?
A Last Minute AVC is an excellent way of funding any shortfall between the tax-free cash lump sum provided for within the Superannuation Scheme and the maximum Revenue approved tax-free cash entitlement. The benefits of investing in a Last Minute AVC include:
- Receiving a refund of tax on pension contributions
- Maximising your tax-free cash lump sum at retirement.
How does it work?
A single investment in an AVC is made prior to retirement. Following retirement, you get back your initial investment, less charges; and you also receive a tax rebate direct from Revenue. It is your own responsibility to claim the rebate from Revenue. The tax reliefs available are those currently applying, and the value of these tax reliefs apply directly to you. Because this is a short-term investment, it will not provide an investment return.
N.B. You can’t do a Last Minute AVC after retirement, so please ensure you get in touch in advance of your retirement date.