Maximising your Public Sector Pension
27 October 2017
Maximising your Public Sector pension
Most people who work in the Public Sector have a fair idea of how their Superannuation pension works, providing set retirement benefits based on their salary and the length of their service. Many are also familiar with methods of making up for gaps in their service which can impact their retirement benefits. This can be achieved by either Purchasing Notional Service (also known as “buying back years”) or by making Additional Voluntary Contributions (AVC’s) into a separate pension plan which runs alongside your Superannuation pension.
If you decide to Purchase Notional Service then you will be told how much you will need to pay and this will normally be a set amount which will be deducted regularly from your salary. You will also have been advised exactly what extra benefits you should receive at retirement in return for the payments.
Why should you consider AVC’s?
AVC’s can provide a more flexible way of boosting your retirement benefits. They do not usually come with any guarantees, however they can provide additional options at retirement. They also provide a method of solely targeting the maximisation of your retirement lump sum, which can be more suitable and affordable to many people.
How can you make AVC’s?
AVC’s can be set up as regular payments, either deducted from your salary or by direct debit. You can also make lump sum payments into to them and claim Income Tax relief against your earnings for the previous year, as long as the contribution is made before October 31st of the current year. A good financial advisor can help you work out your maximum allowable contribution using your P60 and (ideally) your end-of-year payslip.
If you already have a regular premium AVC policy in place you can make the lump sum contribution into that plan by simply sending a cheque to your provider. However you also have the option of placing it into a separate AVC policy. This can give you wider investment diversification, and can also represent better value for your contributions compared to your current plan. There are several ways in which the various providers can apply charges and the charging structure of the different options should be carefully considered.
Should you decide to make a lump sum contribution or start a regular payment AVC plan a Qualified Financial Advisor will be able to compare and clarify the applicable charges for you and help you find the most suitable plan for you. He or she will also advise you on an ongoing basis about getting the most out of your AVC plan by making appropriate investment choices over the life of the plan, and also about your best options when you reach retirement age.
Sean Sweeney, QFA is a Qualified Financial Advisor. You can contact him through John F. Loughrey Financial Services by telephone on 074-9124002 or by email on sean@jfl.ie
