Why PRSA AVCs?
PRSA AVCs are Additional Voluntary Contributions made through a Personal Retirement Savings Account.
PRSA AVCs are a flexible and convenient method of making additional contributions to help strengthen your retirement benefits.
• Give you control over your choice of funds and provider.
• Tax relief on contributions.
• Potential for a larger tax-free lump sum at retirement.
• Access to an ARF/AMRF at retirement.
• PRSA AVCs are easy to understand and easy to set up.
• PRSA AVCs could help you retire early.
Scope to make PRSA AVCs and maximise retirement benefits
You can make PRSA AVCs if the benefits that you will receive at retirement from your superannuation scheme and any benefits retained from previous employments, are projected to be lower than the maximum allowed by Revenue. The following are examples of where there will be scope for providing additional benefits:
• Missing Years
If you do not expect to have full service, you could use PRSA AVCs to make up part or all of the difference between the maximum allowable tax-free lump sum and the tax-free lump sum based on shorter service.
Likewise, you could use PRSA AVCs to bring your pension up to the maximum allowed by Revenue.
(Note: If your sole reason for making AVCs is to increase your pension income you should seriously consider the ‘Purchasing Notional Service’ (PNS) option offered by your superannuation scheme).
• Non-pensionable Earnings
If you have non-pensionable earnings (e.g. overtime) you could use PRSA AVCs to fund for a pension based on your total earnings.
• Social Welfare Integration
Class A PRSI contributors have their pension benefit reduced to take account of their eligibility to receive the contributory retirement pension (single rate). The shortfall between the resultant pension and the maximum allowable pension under Revenue rules can be made up by PRSA AVCs.
• Spouse’s Pension (Death in Retirement)
The amount of spouse’s pension that can be provided is 100% of the maximum member’s pension. Your superannuation scheme provides a spouse’s pension of 50% of your pension.
• Additional Member’s Pension
The Revenue maximum pension is 2/3rds of remuneration reduced by the pension equivalent of the lump sum. This maximum pension after lump sum could be as high as 60% of remuneration which leaves significant scope for PRSA AVCs in the public service, where the maximum pension is 50% of pensionable pay.
PRSA AVCs, taken out for any of the reasons highlighted above, can be used to offset the effect of these reductions.
PRSA AVC’s are a very tax efficient means of saving money
For more information please contact us today.