Additional Voluntary Contribution (AVC)
Most commonly known as Pension Top Ups, AVCs offer individuals the opportunity to boost their pension savings beyond mandatory contributions, providing a means to enhance retirement income and secure a more comfortable financial future.
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What is an AVC?
Additional Voluntary Contributions (AVCs) are tax-efficient extra payments you can make in addition to your existing pension. Whether you started your pension later in life, or have extra cash to put away, an AVC is a pension option for you. When you retire, you can use the money you invested into an AVC to buy additional pension benefits you want.
What are the advantages of AVCs?
Additional Voluntary Contributions (AVCs) are discretionary payments individuals can make to supplement their pension savings beyond regular contributions to workplace or personal pension schemes. AVCs offer flexibility, allowing individuals to enhance their pension pot by contributing additional funds, providing financial security for retirement. These contributions are voluntary, empowering individuals to decide the amount and frequency of payments based on their financial situation. Moreover, AVCs may offer tax efficiency, potentially reducing overall tax liability through qualifying contributions. This flexibility and potential for increased retirement income make AVCs valuable for optimizing pension planning and ensuring a comfortable retirement.
With AVCs, you have control over your investment, enabling you to adjust contributions according to your evolving needs. Whether increasing, decreasing, stopping, or restarting contributions, this adaptability ensures your investments align with changing priorities. Eligibility for an AVC Plan typically arises upon becoming a member of your employer’s Superannuation Scheme, with contributions subject to Revenue-set limits and a minimum monthly contribution of €75 (or equivalent).
Tax Relief
Investing in an AVC allows you to benefit from tax relief on your investments, For example: If your marginal rate of tax is 40% and you invest €100, the actual cost to you is €60 as you get 40% (€40) in tax relief. This makes it much more tax efficient compared to a savings account as you can also maximise your tax-free lump sum on retirement.
Retire Early
Every investment you make into your AVC will grow your Pension fund, gaining you closer to your ideal estimated fund value. Meaning you could be retiring sooner than you think. The state pension retirement age is ever increasing, why not personally take control of when you retire?
Flexibility
flexibility to modify your Additional Voluntary Contributions (AVCs) at your discretion. You can increase, decrease, stop, or restart your AVC contributions as needed. This adaptability allows you to align your pension strategy with changing financial circumstances, ensuring that you have control over the level of contributions based on your preferences, life events, or evolving priorities.
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What are my investment options?
This is entirely your own choice and dependent on your risk profile, it is usually invested in a range of unit linked funds. You’ll have access to a wide range of different assets with varying degrees of risk, so you’ll be sure to find a solution that works for you.
Retirement options with AVCs.
- Tax free lump sum
- Approved Retirement Fund
- Annuities
- Taxable cash
Your Questions Answered
We’re living longer than previous generations. Upon retirement, on average we will have 20-30 years of retirement. A pension plan will make sure you’re financially sound for these years. Whether you wish to travel, retire to the country, or spend time with your children & grandchildren.
The amount you will receive per month entirely depends on how much you’re willing to pay per month, the length of time you’ve been making contributions, the type of pension plan and its investment return. You can also choose to receive a lump sum upon retirement or not.
As of today, the State Contributory Pension is about €240 per week. For most people, during their 20-30 years of retirement, this simply isn’t enough. When you pay into a pension plan, you will receive both the state pension (If available to you) and your Pension Plan.
Tax relief reduces the actual cost of your pension. You do not have to pay tax on money that you put into a personal pension (This falls within the limits set out below). This is calculated at the highest rate of tax you pay (Currently 20% / 40%)
Example:
Monthly contribution = €100
Tax Relief (40%) = €40
Cost to you = €60
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