The GRA AVC Plan has been in operation for many years. For most of those years the plan only dealt with members nearing retirement who had the scope to increase their tax free retirement gratuity from the Garda Superannuation Scheme.

When Penpro was appointed by the GRA the plan was widened to allow all members make contributions to the plan and avail of the excellent tax reliefs available and benefits accruing. Over 3000 members have made AVCs.

Today the benefits of the plan can be looked at under two headings as follows:

• The Last Minute AVC ( For members within 2 years of retirement)

• The Regular AVC ( For all members who want to build up tax free cash and convert 41% to 20% tax)

Set out below are the workings of the plans which will hopefully help you to understand what the plans are about. Any queries whatsoever contact Penpro @ 01 2000100.

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         The Last Minute AVC (For members within 2 years of retirement)

When calculating superannuation earnings for the purpose of calculating pension and tax free gratuity under the Garda Superannuation Scheme, overtime and non rostered unsocial hours earnings, because they are not a permanent part of pay, are not included.

However as these earnings are taxed under PAYE , Pension Law allows them to be included when calculating the maximum tax free gratuity allowed by the Revenue Commissioners. Pension Law states that when calculating the earnings to be used for this purpose , they must be averaged over the best 3 consecutive years in the last 10 years prior to retirement. Where the best 3 years are not the last 3 the Revenue Commissioners allow us to apply an uplift factor to give the earnings a current day value.

So how does this work in practice?

1. A couple of months before retirement you contact Garda pay ( 064 – 70300) and  request “ A certificate of earnings for AVC purposes”

2. You send the certificate to Penpro who will do a calculation to ascertain what scope, if any, you have to make a last                       minute AVC. Penpro will write to you  outlining the basis of the plan and request you to complete an application form and return it with cheque/draft payable to “ Irish Life Assurance plc” The majority of members pay the AVC by credit union draft having borrowed the money from the credit union. Remember the money is returned fairly quickly to the credit union after you retire.

3. You will get a Tax Certificate from Irish Life confirming that you have paid the  AVC.

4. To get tax rebate you send the Tax Certificate to your Inspector of Taxes.

To get prsi rebate you send a copy of the Tax Certificate to: “Customer Service Section, Office of the Collector General, Sarsfield House, Limerick”

(Very important note: If you are claiming a tax rebate in respect of the previous tax year you must send the Tax Certificate  to your Inspector of Taxes to reach him no later than the 31^st October in the current year. The 1^st November is too late.)

5. On retirement you get a letter from your station confirming that you have retired. Send it to Penpro and we will arrange for payment to you of your AVC, less a small administration charge.

( Important Note:  The Revenue Commissioners have applied limits to the maximum AVC on which a member can claim a tax rebate in each year. This is based on age. Therefore any member who has sizeable overtime earnings should contact Penpro 2 or 3 years before retirement in order to ensure that they get their full tax rebate entitlement by spreading the AVC over more than one year.  

Figure Example:

AVC Payment: € 10,000 Less Administration Charge(2.95%): €      295        Amount paid back to member:  €   9,705 Tax(41%) and PRSI(2.90%) rebate: €   4,390     Total amount received by member: € 14,095 Less: AVC Payment: € 10,000     Profit: €  4,095

                                                

The Regular AVC(For all members who want to build up tax free cash and also convert 41% to 20% tax)   

Background:

When a member retires, with 30 years service, his annual pension is calculated as 50% of his superannuation earnings. This puts a member with no other income firmly in the 20% tax bracket. Your AVC plan uses this position by allowing you put money you earn today and is taxed @ 41% into an AVC account, get full tax and PRSI relief on the contribution which is given automatically by garda pay, and then draw  down the money after retiring at 20% tax.

Example of member retiring today with AVC account:

Prior to Retiring AVC Account After Retiring  Earnings:     € 60,000   Annual  Pension:     €30,000  Tax: Married:    Tax: Married: €30,000 x 20%              €45,400 x 20%                   and             €14,600 x 41% -> Has AVC account of €45,000 built up over a number of years by moving some of his 41% taxed earnings into an AVC account on which he got full tax and prsi relief. -> As his pension is €30,000, he is not using his full 20% threshold of €45,400. He can therefore draw down from his AVC up to €15,400 each year taxed @ 20%.

FREQUENTLY ASKED  QUESTIONS

“If I get another job after I retire can I continue to make AVCs to my account”

Once you retire you can no longer make AVCs to this account. However your account continues to earn interest.You can set up a separate plan in respect of earnings from your new job.

“ What if I get another job after I retire that keeps me in the 41% tax bracket “

In such circumstances you should  not  take any money from your AVC account as it would be taxed at 41%. Rather you should wait until you retire from working when you will then be in the 20% tax bracket and then you can access your AVC account.Your account continues to earn interest..If having retired from the force you take a year off before you get another job you can  take money from your AVC account as you would be in the 20% tax bracket in that year assuming that your only income is garda pension.

“ My spouse will continue working after I retire—will that affect my tax position”

If your spouse is earning more than €42800 approx per annum then any money you take from your AVC account will be  taxed @ 41%. Therefore in such circumstances you should wait until your spouse retires or goes part-time when you can take money from your AVC account as you are likely to be in the 20% tax bracket.

“ Can I increase, decrease or even stop my contribution at  some future date”

 You can,increase,decrease,and stop your AVC at any time by contacting Penpro. You can make a regular weekly AVC and you can also make a lump sum payment either on it’s own or with a regular AVC.

“ If I make a lump sum payment how do I get the tax relief”

With the regular weekly AVC the tax relief is given by garda pay. So for example if you decided to make AVC of  €50 per week say starting this coming friday ,when you get your payslip you will find that your  take home pay is down €26 (pre ’95) and €25 (post’95) and the taxman will find that he  is down €24(pre’95) and €25 (post’95). If you make a lump sum  payment you will receive a tax certificate  stating that you made the AVC .You send the certificate to your Inspector of Taxes to claim  tax rebate .For lump sum  payments made before the 31^st October in any year  you can backdate to the previous year for  tax relief..For example if you made lump sum payment of €10,000 and backdated it to last year for tax relief you would get tax rebate of  €4,100. You would also get PRSI rebate of €290.

“Has this AVC plan anything to do with me being able to increase my tax free gratuity based on my overtime and non rostered unsocial hours earnings”

All members who have a history of overtime and/or non rostered unsocial hours earnings will be provided with a quote from Penpro advising the scope, if any, they have to increase their tax free gratuity. The quote is done very close to retirement when the member gets a certificate of earnings from garda pay sends it to Penpro and we do the quote.Lets say a member gets a quote advising that he can increase tax free gratuity by €5000.He has a choice, he can take the €5000 tax free from his AVC account or he can make a lump sum payment a week or so before retirement ,get it back a week or so after retirement less a small administration charge, and gets full tax rebate from the Inspector of  Taxes.Rather than diluting your AVC account a member would be better making the lump sum..

“What happens if I die before retirement”

In the event of death before retirement the full value of your AVC account including the taxmans money is paid tax free to your dependants .

On death after retirement your AVC account is transferred to your spouse and on his/her death to children or estate.

We have tried to provide answers to the most frequently asked questions and hope that they answer all your questions. Before joining it is important to take advice and you can do so by contacting:

                        PENPRO  @  01 - 2000100 

                                    Penpro Ltd is regulated by the Financial Regulator