Tuesday 6 December 2016

Four weeks left to dip into the money in your top-up pension

Published 28/02/2016 | 02:30

'Under Budget 2013, Michael Noonan introduced a measure which allows people to make a once-off withdrawal of up to 30pc of the value of their AVC (Additional Voluntary Contribution) fund - as long as they withdraw that money between March 27, 2013 and March 26, 2016'
'Under Budget 2013, Michael Noonan introduced a measure which allows people to make a once-off withdrawal of up to 30pc of the value of their AVC (Additional Voluntary Contribution) fund - as long as they withdraw that money between March 27, 2013 and March 26, 2016'

The clock is ticking for workers who would like to get their hands on some of the money in their top-up pensions before they retire.

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Under Budget 2013, Michael Noonan introduced a measure which allows people to make a once-off withdrawal of up to 30pc of the value of their AVC (Additional Voluntary Contribution) fund - as long as they withdraw that money between March 27, 2013 and March 26, 2016.

An AVC fund is essentially a top-up pension, where you make extra savings with a view to boosting your pension pot.

So if you're short of cash and would like to dip into your AVC, you have another four weeks to do so.

Bear in mind, however, that you will be taxed at your higher rate of income tax on any money you draw down. So depending on the amount you withdraw, and your earnings in the year you withdraw it, the tax rate could be zero, 20pc or 40pc. You do not have to pay PRSI or USC on any money you withdraw from your AVC.

Should you wish to take up the option to withdraw money out of your AVC, contact your pension fund administrator and establish what you need to do.

"If you qualify and decide to proceed, you must advise the administrator, by way of an irrevocable written instruction, that you wish to exercise the option and provide the administrator with any other information that may be required to process your request," say the Revenue Commissioners.

Before taking any money out of your AVC, understand exactly how the withdrawal will eat into the value of the pension you are expecting when you retire.

Remember, you may be able to draw down some or all of your AVC tax-free if you wait until your retirement to take money out of your AVC. Ask yourself do you really need the cash. If you're simply taking the money out of your AVC to fund an expensive holiday abroad, for example, it would probably be wiser in the long run to leave your money where it is.

That AVC could be the difference between you being broke in retirement, and not, particularly if you live a long retirement.

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