Under your company pension scheme, your employer will usually be paying contributions into your pension scheme on your behalf. You may also be required to pay a certain level of contributions yourself.
Additional Voluntary Contributions, also called AVCs, are personal contributions, which you can invest into your pension plan to increase your benefits when you retire.
Who can make Additional Voluntary Contributions?
Generally most people who are in a company pension plan can make AVCs.
Why should I consider making Additional Voluntary Contributions?
You may want to consider making AVCs if:
- you started your pension plan late and want to ‘catch up’
- you want to boost your retirement fund to allow you to fund for a better retirement
- it suits you now to pay a little extra into your pension plan
What are the advantages of Additional Voluntary Contributions?
You will benefit from:
1) Tax relief on your contributions at your highest rate, subject to Revenue limits. For example if you pay tax at 20%, and make a €1,000 AVC, the net cost to you is only €800.
2) Tax free growth on your fund.
3) Flexibility – You can increase, decrease or stop paying contributions when it suits you.
You can also pay once-off lump sums when you want subject to Revenue limits.
4) Control – You can decide how and where you want to invest your AVCs.
How much can I pay?
You can pay as much as you can afford, subject to some limits.
Tax relief on your total contributions is limited based on your salary and age as follows:
Up to age 30
Age 30 but less than 40
Age 40 but less than 50
Age 50 but less than 55
Age 55 but less than 60
Age 60 and older
As of January 2016, the maximum salary that can be taken into account for these purposes is €115,000. This amount may change.
These limits do not include contributions that your employer makes on your behalf.
The Revenue also limit the amount that can be paid into a company pension plan to ensure the maximum retirement pension set by the Revenue is not exceeded. The limit is based on the amount of time you have worked for the company and your final earnings. Most people have scope to pay AVCs, but your Financial Broker will be able to advise you.