Why should I make an AVC?
Making an Additional Voluntary Contribution (AVC) is an
excellent way to boost your retirement savings. By contributing more
than the minimum required by your pension scheme, you can enhance your future
financial security and take advantage of tax efficiencies. These additional
contributions can grow over time as they are invested, ensuring you have a
larger pension fund at retirement. Furthermore, AVCs offer a flexible way to
save, as you can adjust the amount you contribute based on your financial
situation.
How much value do they add?
Well that really depends on your age and how much you
contribute.
Current Age (approx.)
|
€100 per
month to age 65
|
55
|
€14,312
|
45
|
€34,909
|
35
|
€63,717
|
25
|
€103,381
|
Projected net future investment return of 3.09% p.a. on the
CERS Multi Asset Fund.
The younger you are, the more you will contribute and the
longer the fund will be invested – allowing for a greater impact. However, as a tax efficient savings plan –
AVC’s still make sense when you are older.
Visit our calculator
to see how AVC’s can add value to your fund.
AVCs offer several tax benefits that can make them an
attractive option for enhancing your retirement savings. Firstly, any
contributions you make to your AVC are typically eligible for tax relief at
your highest rate of income tax. This means that a portion of your
contributions is effectively funded by the tax savings, reducing your overall
cost of investing in your pension, see below.
|
40% Tax Rate
|
20% Tax Rate
|
AVC amount
|
€100
|
€100
|
Less Tax
saved
|
€40
|
€20
|
Actual cost
to you
|
€60
|
€80
|
Additionally, investments within your AVC grow tax-free,
which can significantly increase your overall returns. This tax-efficient
growth can help your pension pot accumulate more rapidly compared to taxable
investments.
When you eventually retire and start drawing from your AVC,
you may be able to take a portion of your savings as a tax-free lump sum. The
exact amount you can withdraw tax-free will depend on your specific pension
scheme rules and limits set by the government.
In summary, AVCs not only allow you to save more for your
retirement but also provide substantial tax advantages that can maximize the
value of your contributions and investment growth.
How do I make an AVC?
Complete the AVC form here–
once completed you can email the form to your payroll department and copy
info@cers.ie
Should I make a regular AVC or a lump sum AVC?
You can make a regular monthly AVC from your salary – with
the tax relief provided at source – or you can make a lump sum AVC.
When deciding whether to make a regular AVC or a lump sum
AVC, it's important to consider your individual financial circumstances and
goals.
Regular AVCs allow you to spread your contributions over
time, making it easier to manage your cash flow and budget.
On the other hand, a lump sum AVC can be beneficial if you
have a windfall or a significant amount of money available to invest. This type
of contribution can immediately boost your pension fund and can be useful if you are very close to retirement.
Ultimately, the choice between regular and lump sum AVCs
will depend on your financial situation.
How to make a lump sum AVC
You can transfer your lump sum AVC directly to the CERS bank
account by EFT using the details below.
Please include your name or CERS member ID as a narrative so
that we can easily identify who the amount is from.
Once our team receive your AVC, we will send you an
acknowledgment. We will do this within ten working days of receiving your AVC.
You do not need to send the acknowledgment to your local Inspector of Taxes but
do keep it for your records.
We have been
advised of a requirement to upload a pension tax certificate or a pension
contribution details form when you make a once off AVC. We will send you a form
which can be completed by you and uploaded to ROS when we acknowledge your AVC.
How to claim tax relief on your lump sum AVC
If you are a PAYE employee and do not file a return online,
you must make your claim for tax relief and your personal tax return before the
31st October 2024.
If you are paying and filing online via ROS, the deadline
this year is the 14th November 2024.
The granting of tax relief is at the discretion of your
local Inspector of Taxes. It is important to note if your AVC is against this
year’s income, you may not get a refund, but may receive amended tax credits
instead.
You
should be sure that you are eligible for tax relief on the AVC contribution you
wish to make.
You
can confirm this with your local tax office if you are uncertain. Check the
contact locator on the Revenue website to find your local Revenue office.