Additional Voluntary Contributions (AVCs) in Ireland

Here are some key benefits of Additional Voluntary Contributions (AVCs) in Ireland:

• Tax Relief
  Contributions qualify for income tax relief at your marginal tax rate, reducing your effective cost of saving.

• Boosts Retirement Benefits
  AVCs help increase your overall pension pot, enhancing your retirement income or tax-free lump sum.

• Flexible Contributions
  You can choose how much to contribute to your pension plan and adjust or stop contributions at any time, depending on your financial situation.

• Investment Growth
  Increasing the amount you pay each year into your pension leverages the power of compounding interest with a greater amount from additional contributions to compound, potentially increasing your retirement savings over time.

• Fills Pension Gaps
  Ideal for making up shortfalls due to career breaks, part-time work, or late entry into a pension scheme.

• Supports Early Retirement
  AVCs can help fund early retirement by supplementing income or increasing the tax-free lump sum available.

• Wide Range of Investment Options
  Many AVC providers offer a variety of investment funds to match different risk profiles and goals.

• Control Over Retirement Options
  At retirement, AVCs can be used flexibly – to take a lump sum, buy an annuity, or invest in an Approved Retirement Fund (ARF).

1. Check Your Eligibility

Ensure you’re a member of an occupational pension scheme. AVCs are only available to those enrolled in such schemes (usually through your employer).

2. Contact Your HR or Pension Provider

Speak to your employer’s HR department or pension administrator. They will guide you on how to set up AVCs specific to your pension plan and provide the relevant forms or online access.

3. Decide How Much to Contribute

Choose an amount based on your retirement goals and financial capacity. Remember, contributions qualify for income tax relief (subject to Revenue limits), making them tax-efficient.

4. Set Up Payroll Deductions

Most AVCs are deducted directly from your salary. This makes it convenient and ensures tax relief is applied automatically through payroll.

5. Select Investment Options

You’ll typically have a range of investment funds to choose from, depending on your risk tolerance and retirement timeline. The pension provider can help with this.

6. Review Regularly

It’s good practice to review your AVCs annually to ensure they align with your retirement goals, financial situation, and tax relief limits.

AVCs aren’t entirely tax-free, but they offer valuable tax benefits that make them one of the most efficient ways to save for retirement.

Tax Relief on Contributions

You can claim income tax relief on your AVC contributions at your highest tax rate (20% or 40%), subject to Revenue limits based on your age and income.

Tax-Free Investment Growth

Your AVCs grow tax-free while invested. Any gains made within the fund are not subject to income tax, capital gains tax, or DIRT.

Tax at Retirement

• You can take up to 25% of your total pension fund (including AVCs) as a tax-free lump sum, subject to limits.

• The remainder is used to provide retirement income, which is taxable under PAYE (including income tax, USC, and possibly PRSI).

In Short:

• Contributions: Tax-relieved

• Growth: Tax-free

• Withdrawals: Partially taxable

Tip: speak with one of our Fianancial Advisors, to understand how AVCs can work best for your personal tax situation.

Your AVC (Additional Voluntary Contributions) pension typically refers to contributions you’ve made into your current or previous occupational pension scheme to supplement your standard pension benefits.

You can usually access this pension at retirement age. However, certain pension schemes or specific personal circumstances may allow for earlier access.

If you’re thinking about drawing down your pension early, it’s important to speak with a qualified financial advisor to fully understand the potential impact on your long-term retirement income.

At retirement, you’ll have a range of options for accessing your AVC pension, including:

• A tax-free lump sum of up to 25% (subject to a lifetime limit of €200,000)

• Purchasing an annuity (guaranteed income for life)

• Transferring funds into an Approved Retirement Fund (ARF)

• Taking the remaining balance as a taxable lump sum

To explore your best options, feel free to contact us today for personalised guidance.