additional voluntary contributions

Members of occupational pension schemes can make AVC (additional voluntary contributions) either to their occupational schemes or to an AVC PRSA.

As occupational schemes makes investment decisions for all of it’s members. The investment choices on offer will be reasonably conservative. If you are a younger member of the scheme you may want to make your AVC contribution to an AVC PRSA. This allows you to access pension investment funds that you may not be able to access through your occupational scheme. Such funds may include property funds.

Investment of AVC’s in a PRSA may allow individuals to diversify their pension investment between equity focused funds in their occupational scheme and alternative asset based funds in their AVC PRSA

Tax relief:

Contributions made by individual scheme members to the group pension scheme are eligible for tax relief at the individual’s marginal income tax rate. The current maximum limits for income tax relief are as follows:

The limits above include all contributions made by the individual (mandatory scheme contributions and AVC’s) and are capped to a maximum earnings ceiling of €150,000 for 2010. This will be reduced to €115,000 in 2011.

It is possible to backdate personal, once off contributions paid in the current tax year to the previous tax year, once the contribution has been made before October 31st. It is also possible to carry forward any excess contribution made to gain tax relief in future years.
PAYE individuals making regular contributions to a PRSA can receive tax relief through their payroll, in applying to have their tax credits amended.  

When making AVC contributions to an AVC PRSA, the individual may need to make a tax return at the end of each tax year to gain the relevant tax rebate due on AVC contributions.  This may suit individuals who have other sources of income such as rental income from investment property