Members of occupational pension schemes have the ability to make AVC (additional voluntary contributions) either to their occupational schemes or to an AVC PRSA.
As occupational schemes makes investment decisions for all of it’s members, the investment choices (if any) on offer, will be reasonably conservative. If you are a younger member of the scheme, you may wish to look at making your AVC contribution to an AVC PRSA in order to access pension investment funds that you may not be able to access through your occupational scheme. Such funds may include property funds which are not normally offered to occupational scheme members.
Investment of AVC’s in a PRSA may allow individuals diversify pension investment between equity focused funds in their occupational scheme, with alternative asset based funds in their AVC PRSA.
Contributions made by individual scheme members to the group pension scheme are allowable for tax relief at the individual’s marginal income tax rate. The current maximum limits for income tax relief are as follows:
Maximum Tax relief
30 – 39
40 – 49
50 – 54
55 – 59
The limits above include all contributions made by the individual (mandatory scheme contributions and AVCs) and are capped to a maximum earnings ceiling, of €150,000 for 2010, being reduced to €115,000 for 2011.
It is possible to backdate personal once off contributions paid in the current tax year, to the previous tax year, once the contribution has been made before Oct 31st. It also possible to carry forward any excess contribution made, in order to gain tax relief in future years.
PAYE individuals making regular contributions to a PRSA can receive tax relief through their payroll, by applying to have their tax credits amended.
When making adhoc AVC contributions to an AVC PRSA, the individual may need to make a tax return at the end of each tax year in order to gain the relevant tax rebate due on AVC contributions. This may suit individuals who have other sources of income such as rental income from investment property.