Mercer Oneview Ireland

Additional Voluntary Contributions (AVCs)

AVCs are the means whereby a member of an occupational pension scheme can increase their pension contributions beyond the minimum required by the scheme rules.

What are the advantages of AVCs?

The main advantages of making AVCs include:

  • increasing your benefits at retirement

  • maximising your tax-free benefits at retirement

  • tax relief on your AVC contributions, subject to Revenue limits

  • a range of investment options, with tax-free accumulation of investment returns

  • for members of Defined Benefit pension schemes, a large AVC fund will enable them to take a Retirement Lump Sum without reducing their guaranteed retirement income from the scheme.

In short, making AVCs to your pension scheme is one of the most tax efficient ways of saving and investing.

Are there any disadvantages of making AVCs?

There are a few points which you should bear in mind before making AVCs:

  • AVCs cannot be cashed in before retirement (except in limited circumstances if you leave the company with less than two years' service)

  • You cannot borrow back any of your contributions or use them as collateral for a loan

AVCs will therefore not be suitable for you if you will need the money before retirement.

How much can you contribute?

You can contribute as much as you like. However, you only get tax relief on your pension contributions within the Revenue tax limits set out below.

AGE

% OF EARNINGS THAT CAN BE CONTRIBUTED TO A PENSION AND RECEIVE TAX RELIEF

29 or under

15%

30-39

20%

40-49

25%

50-54

30%

55-59

35%

60+

40%

Please note that these limits include any contribution you might be making to the main scheme already. For example, if you are 35 and already contributing 5% of your earnings to your pension scheme, you will only receive tax relief on AVCs up to a limit of a further 15% of your earnings. Also, for tax relief purposes, any earnings above €115,000 per annum do not count towards the tax relief limits.

What can I do with my AVCs at retirement?

You may be able to take all or part of your AVCs as a Retirement Lump Sum, depending on your final salary and years of service. Any balance may be used:

  • to increase your guaranteed income in retirement

  • to invest in an Approved Retirement Fund (with certain restrictions)

  • as a taxable lump sum (with certain restrictions)

  • The information contained in this website is for information purposes only. It should not be taken in any way as advice. It should not be relied upon as an offer to purchase or sell any of the products that are discussed.
  • The value of investments can go down as well as up.
  • Investments or products mentioned on this site may or may not be suitable for you.
  • Before investing or purchasing any product you should always seek independent financial advice. Mercer can provide independent financial advice if required.

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