WHAT ARE ADDITIONAL VOLUNTARY CONTRIBUTIONS?
Additional Voluntary Contributions, (known as “AVCs”) are extra contributions which you can make towards your pension to enhance your benefits at retirement.
AVCs are a tax-efficient way of saving for your retirement as relief from Income Tax is allowed on AVCs at your marginal rate as they are paid by salary deduction. This means that the reduction in take home pay is much less than the amount of the AVC you are contributing.
For example, the payment of a regular AVC of €100 would reduce take home pay in the current tax year as per the schedule below (assuming marginal tax is paid at the rates shown):
The same amount of Income Tax relief applies to AVCs paid by personal cheque and not deducted through payroll although the relief is delayed until the claim is made directly to the Revenue.
You can also obtain tax relief on backdated AVCs.
If you pay a lump sum AVC by cheque and claim tax relief on this AVC by 31st October you can obtain tax relief in respect of the previous calendar year.
For example, if you pay a lump sum AVC by 31st October 2020 you may obtain tax relief in respect of any unused tax relief for 2019 providing you claim this relief from the Revenue by the 31st October 2020. Please note that the Revenue deadline is extended for members who complete their tax return online using the Revenue Online Service (ROS).
AVCs can be deducted from your salary each month by your employer or remitted by you on a once off basis each year to your retirement scheme. AVCs are a great way to give a boost to your retirement savings fund and you can avail of tax relief on AVC’s paid, subject to Revenue limits.
While many of us do not avail of AVCs until later in life, for those of us who can, they are a great, tax efficient tool. In fact, these AVC contributions grow tax free until retirement, so it's a great investment.
If you would like to learn more about preparing for your future, please contact our team in CERS if you would like to explore your options. We are available via email: firstname.lastname@example.org
Our video below outlines the benefits of AVCs:
AVCs work like rocket fuel for your pension from CPAS on Vimeo.
This update is for information purposes only. It does not constitute advice and it does not take into account your knowledge, experience, investment objectives or financial situation. Investment returns are not guaranteed and can rise or fall. You should always consider taking independent financial advice when reviewing you investment choices