PRSA AVC for Public & Private Sector
None of your money goes on commission:
PRSA AVCs are Additional Voluntary Contributions made through a Personal Retirement Savings Account. This is a new and convenient method of funding for additional retirement benefits, and the majority of teachers have the scope to make PRSA AVCs.
If you have money to invest between now and retirement, it makes sense to consider PRSA AVCs. By setting up your PRSA on a nil commission basis through LABrokers you save 5% on each and every contribution you make to the plan for the life of the plan.
The product LABrokers offer you is exactly the same as you would get through a Zurich channel elsewhere except we have decided to distribute Zurich's PRSA on a much lower profit margin.
This philosophy works to your immediate advantage now and in the years to come.
Why PRSA AVCs
PRSA AVCs give you more control over how you use your AVC fund in retirement
PRSA AVCs are owned by you – they are not arranged under trust and can be carried from employment to employment. PRSA AVCs give you greater freedom at retirement. On retirement, your PRSA AVC fund (after tax-free cash) can be invested in an Approved Retirement Fund (ARF). This enables you to keep control of your fund at retirement and gives you the freedom to draw down money as and when it is required.* On your death the monies within your ARF investment can be passed on to your dependants.
the past the only option for the use of funds from an AVC (after tax-free cash) was the purchase of an annuity.
Subject to certain legislative criteria.
A tax on a deemed withdrawal from ARFs now applies. This amounts to Income Tax on a deemed withdrawal of 1% of the fund at 31st December 2007, 2% of the fund at 31st December 2008 and 3% on each subsequent 31st December.
AVCs are a very tax efficient means of saving money.
Montly Tax and PRSI savings Tax @ 41%* + Class D
PRSI @ 2.9%**
Contribution per month Net Contribution per month Tax Saving per month Net Contribution per month Tax Saving per month €200 €112.20 €87.80 €106 €94 €400 €224.40 €175.60 €212 €188
Note: For individuals earning more than €100,000 per annum, an extra health levy of 0.5% per annum is payable.
Tax relief limits on contributions Age At Your Birthday This Year % of Net Relevant Earnings* Under 30 15% 30 to 39 20% 40 to 49 25% 50 to 54 30% 55 to 59 35% 60 and over 40%
*Net Relevant Earnings, e.g. gross salary plus overtime, are subject to a ceiling of €262,382 for the purpose of calculating tax relief. These limits include any contributions you are making to your employer’s pension scheme and any current AVCs.
Note: The maximum allowable pension fund on retirement for tax purposes will be capped at 5.165m or the value of the individual’s pension fund at 7th December 2005, if higher. These amounts will be indexed annually in line with an earnings-index from 2007 tax year onwards. Any excess in the pension fund over these limits will be subject to a once-off tax charge on retirement (currently 41%). Subsequent drawdowns will also be subject to tax at your then marginal rate and the health levy.
PRSA AVCs give you more choice in terms of providers and fund options.
Scope to make PRSA AVCs and maximise your retirement benefits
You can make PRSA AVCs if the benefits that you will receive at retirement from your superannuation scheme and any benefits retained from previous employments, are projected to be lower than the maximum allowed by Revenue (normally a tax-free lump sum of 150% of final earnings and a pension of 2/3rds of final earnings reduced by the pension equivalent of the tax-free lump sum). The following are examples of where there will be scope for providing additional benefits:
- Missing Years
If you do not expect to have full service and you do not expect to be in receipt of the maximum allowable tax-free lump sum, you could use PRSA AVCs to make up part or all of the difference between the maximum allowable tax-free lump sum and the tax-free lump sum based on shorter service.
Likewise, you could use PRSA AVCs to bring your pension up to the maximum allowed by Revenue.
(Note: If your sole reason for making AVCs is to increase your pension income you should consider the ‘Purchasing Notional Service’ (PNS) option offered by your pension scheme run by the Government).
- Non-pensionable Earnings
if you have non-pensionable earnings (e.g. extra income from exam supervision etc) you could use PRSA AVCs to fund for a pension based on your total earnings.
- Social Welfare Integration
Class A PRSI contributors have their pension benefit based on pensionable earnings less a reduction of twice the contributory retirement pension (single rate). The shortfall between the resultant pension and the maximum allowable pension can be made up by PRSA AVCs.
- Spouse’s Pension (Death in Retirement)
The amount of spouse’s pension that can be provided has increased from 2/3 rds to 100% of the maximum member’s pension. Your superannuation scheme provides a spouse’s pension of 50% of your pension.
- Additional Member’s Pension
The Revenue maximum pension is 2/3rds of remuneration reduced by the pension equivalent of the lump sum. This maximum pension after lump sum could be as high as 60% of remuneration which leaves significant scope for PRSA AVCs in the public service where the maximum pension is 50% of pensionable pay.
- Early Retirement
Under the 'Cost Neutral Early Retirement Scheme'introduced in April 2005, public servants who choose to retire early will have their retirement benefits reduced in two ways:
- by the numbers of years service not completed, and
- by an actuarial reduction factor.
PRSA AVCs, taken out for any of the reasons highlighted above, can be used to offset the effect of these reductions.
The maximum amount of tax-free lump sums which may be paid out of pension funds on or after 7th December 2005 has been limited to €1.29m, where existing lower limits do not apply. While lump sums in excess of this amount may still be paid, they will be subject to tax at the individual’s marginal rate of income tax.
It is the responsibility of the Life Insurance company to ensure that you are not overfunded. If this is the case, you will be made aware of same.
Purchasing Notional Service – PRSA AVCs are an alternative form of provision that allows greater flexibility and control than buying missing years of service via your main pension scheme. Purchasing Notional Service (PNS) should be considered if your main aim is to provide additional income in retirement. Your employer can give you information on PNS run by the Govt.
What if you have an existing PRSA?
If you already have an existing PRSA, you can transfer at no cost to this nil commission PRSA. You can transfer funds from your existing plan to this new one or you can leave your funds as they are.
You will be updated regularly on your PRSA contract.
- Statement of account
- Every six months, you will receive a statement that will inform you of the contributions that you have made over the previous six months. You will also be told the value of your PRSA assets at the end of the period. Please note that these statements may be required by your Inspector of Taxes.
- Investment report
- Every six months, you will receive an investment report outlining information on the investment performance of your funds.
- Statement of reasonable projection
- At the beginning of the contract and every year thereafter, you will receive a statement of reasonable projection that will enable you to estimate your fund at retirement. This projection is not a guarantee of the funds that will be available and may vary substantially depending on your future contributions and investment returns.
- Zurich Life is one of Ireland’s most successful life insurance companies, offering a full range of pension, investment and protection products. The company has won many industry service awards and was named 'Best Insurance Provider' at the 2007 MoneyMate and Investor Magazine Awards. It also received the award for 'Best Customer Service'.
- Web access
- Zurich is a leading provider of information through the web. With access to the Client Centre at www.zurichlife.ie, you will be able to find out the value of your PRSA assets, the investment return of your chosen funds and information on your contributions online.
Step 1: Further information
Step 2: Complete the application form
Step 3: Post completed application form
Post the form to
Greystones, Co Wicklow
Step 4: You will receive written confirmation of receipt of your application.
The contract is between you and Zurich and Zurich administer the product. On commencement of your PRSA Zurich will post all policy documentation to you. There is NO charge to the client for this execution only service. Eagle Star may pay LABrokers a fee from their profits based on the total volume and persistency of all our PRSA business placed with them and that's how we earn on the transaction.
LABrokers cannot offer you any financial advice on this product but there is nothing stopping you doing your research elsewhere and then placing the business with LABrokers on discounted terms. Having said that you will find most of what you need in our information pack.