Pensions & AVC’s


Why start a pension now

Starting a pension may not be on top of your to do list, but with the State pension unlikely to increase in the future, are you confident you’ll have enough in retirement?

Starting early makes sense

The sooner you start a pension the better. Every 7 years you delay starting a pension means you have to double your monthly contribution in order to get to the same result. Our advice is to start even in a small way and you can always increase it in time.


A pension plan is one of the most important investments you a will make in your lifetime. A pension plan is a long­term savings plan, where regular amounts and/or once­ off lump sums are built up into a fund for retirement. Have you ever wondered what you might do when you stop working? The reality is that the majority of us will need to save a significant amount just to maintain our existing standard of living in retirement. Nobody wants to feel restricted or impoverished in retirement but this may be the reality for many people if they do not take the time and make an effort to adequately plan for their retirement.

It’s important that you take the time to calculate how much you realistically need to save – so you can afford the lifestyle you are looking forward to when you retire.

Many people think that saving a small percentage of their salary into their pension plan will be enough to fund a 25­ or 30­ year retirement but the reality is that although some expenses may decrease in retirement others, such as electricity bills, heating bills and medical expenses, many actually increase as you get older. The earlier a pension plan is started, the more time the fund has to accumulate and the better off you will be in retirement.

Ask yourself what percentage of your current salary you would need to live comfortably in retirement? Preparing for retirement – means start saving now!

If you are in your 20s or 30s, the easiest way to establish your pension plan is to start small and build your fund gradually. So, whenever you get a pay rise, commit to putting part of the increase into your pension plan, before you get used to spending it. If you are in your 40s or 50s when you begin saving into your pension plan, you will naturally have more ground to make up, so you should commit yourself to saving a higher amount and you may decide to do this by making Additional Voluntary Contributions (AVCs) towards your retirement.

When retirement benefits are being taken from the Plan, the individual can take up to 25% of the accumulated fund as a lump sum, which is tax free subject to a limit of €200,000.

*This information is provided for illustration purposes only.

You then have three options with regard to how the balance of the retirement fund not taken as a lump sum:

  1. Use to buy an annuity with a life company, or
  2. Transfer to an Approved Retirement Fund (ARF) in his or her own name, or
  3. Take the balance immediately as a taxable lump sum, subject to PAYE & USC.

Benefits of Pension Plans:

  • They provide a means to accumulate capital to be used in retirement to replace earned income.
  • Contributions may qualify for income tax relief at marginal rate, within certain limitations
  • The Plan benefits from tax free investment returns.
  • Part of the Plan benefits at retirement may be taken as a tax free lump sum, within certain limits.

There are a number of risks for consumers in using Personal Pension Plans to provide for their retirement. The value of their investment may go down as well as up, you could get back less than the anticipated or targeted retirement benefits shown at the outset, the retirement fund may fail to keep pace with inflation and you may need access to the Plan funds, at a time and in circumstances in which it is not allowed access to the Plan.

AVCs – Additional Voluntary Contributions

An Additional Voluntary Contribution, is a means by which a member of an occupational pension scheme can increase or top up their existing employer’s pension scheme benefits at their own expense.

Who can take out an AVC?

  • an employee of an existing pension scheme.
  • a member of their employer’s occupational pension scheme for retirement or death in service benefits.

As the name implies, only the individual can pay an AVC. The individual’s employer can not contribute to an employee’s AVC. AVC benefits must be taken at the same time as the individual takes benefits from the employer’s main occupational pension scheme.

The main benefits of AVCs are:

  • You can top you your employer’s retirement benefits as your own expense and have the benefit of income and tax relief, subject to certain restrictions.
  • The AVCs may enable you to take a higher tax free lump sum at retirement, than provided by the employer’s scheme.
  • The AVCs may enable you to retire earlier than if depending only on the employer’s scheme benefits.
  • You can use your AVC to help fund your tax-free lump sum and by doing so will leave you with a larger regular pension from your defined benefit pension.

There is a risk that the consumer could get back less than the anticipated or targeted retirement benefits shown at the outset in return for the AVCs, fund may fail to keep pace with inflation, or may need access to the AVC funds, at a time and in circumstances in which he or she is not allowed access to the Plan.

Our Pension Agencies


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