AVC PERSONAL RETIREMENT BONDS
AVC Personal Retirement bonds are specifically designed for public sector employees who have overfunded their public sector AVCs.
Overfunded AVC funds can be transferred into these Bonds in order to reduce fees/charges as well offering a wider range of investment options to the policy holder.
- No future contributions required
- Very Low fees and Charges on the funds
- No transaction fees/charges to transfer out of the AVC Group Scheme
- Wide range of investment choice with the Bonds
- Very easy access the AVC Bond at retirement
Public Sector AVCs Explained
In general, avcs for public servants are very tax efficient if you have a tax free lump sum shortfall. You will have a shortfall if any of the of the points below apply to your pensionable years of service;
- You have less than full service (40 years) accumulated at your retirement age,
- You have worked past your normal retirement age and have over 40 years service completed,
- You have earned additional non pensionable income such as overtime/commissions/bonuses in the last years up to your retirement.
- If at least one of the points above apply, then you will have a tax free lump sum shortfall at retirement.
Tax Free Lump Sum Shortfall Explained
A Tax Free Lump Sum shortfall is the difference between the Lump sum earned from your years of service at retirement age and the maximum lump sum allowed through Revenue Rules (usually 1.5 times final Salary). Your shortfall is the amount of money that can be withdrawn from your AVCs tax free.
Excess funds over this amount are however, taxable. Many AVC holders in this situation are very disappointed when they are hit with a tax bill on their AVC funds on retirement- which sometimes can be as high as 52% of the fund value.
When a client is overfunded with their AVCs, we recommend the following:
- Stop any future contributions,
- Transfer these fund into from the Group AVC scheme into an AVC Personal Retirement Bond
Know the future of investment
How and when can I get access to the AVC Personal Retirement Bond:
Access to the AVC bond is permitted only when you retire form your job or leave your current position and are in receipt of the related public sector pension entitlements.
What AVC Provider offers these AVC Personal Retirement Bonds:
At Present, Aviva are the only Insurance Company that offer these AVC Bonds in Ireland.
Why transfer to an AVC Personal Retirement Bond
- Any future AVC contributions will be taxable on retirement. Although you are getting tax relief on contributions into an AVC, you consequently will be paying tax on these funds on retirement.
- The AVC Bond will now be fully in your own name and not in a Group AVC scheme. This has the following advantages;
- You have full control over its where the funds are invested
- In the event of your untimely death, this fund will be left to whoever you choose and will be easily located etc.
- AVC Bonds have very low Annual Management charges and fee structures. High charges and fees on a ‘Paid up AVCs’ can erode into the fund value over time.
- There is no cost involved in transferring your funds across from your group AVC scheme to this AVC Bond.
- You have access to both Passive and Active funds that are very suited to your situation (years until retirement/risk tolerance levels etc.). It is important to try and make steady and consistent returns on your funds without taking on excess investment risk. Any positive turns made can be used to pay for some of the unavoidable tax liability due on your funds due on drawdown.
The Transfer Process – How does this work?
In order to transfer your Group AVC Scheme to Aviva’s Personal Retirement Bond you will need
to complete a few very straight forward tasks:
- Request the Group AVC scheme provider to stop your fortnightly/monthly AVC contributions. This can be done via email, phone of letter.
- Complete and sign (e-sign or hard copy) an Aviva AVC Personal Retirement Bond Application
- Sign a standard ‘Letter of Authority’ and a ‘AVC Transfer Request form’. These documents requests that your funds be transferred from the group scheme into your New AVC bond with Aviva.
The whole transfer process can take up to 8-12 weeks to be fully transferred. Please note that there is not cost or charge to your fund for transferring.
Once the funds have been transferred across from to Aviva, The AVC Bond Policy documentation will be sent in the post to you.
You will also receive login details to Aviva’s website so that you can view/review your AVC funds at the click of a button.