Boost Your Pension with AVCs (Additional Voluntary Contributions) in Ireland

Most employers, both in the private and public sectors, will contribute a percentage of your salary to your pension fund, and you as the employee will also make contributions. However, the combined contributions are often below the maximum limits allowed by Revenue.

This creates an excellent opportunity to boost your retirement savings by making Additional Voluntary Contributions (AVCs).

What Is an AVC?

An AVC (Additional Voluntary Contribution) is an optional, extra payment you can make to your pension, above and beyond your regular contributions.

They’re most commonly used by:

• Employees in the public sector

• Members of defined contribution pension schemes

• Individuals looking to increase pension savings and optimize tax relief

Why Make AVCs? 4 Key Benefits

1. AVCs Offer Significant Tax Relief

• Contributions qualify for income tax relief at your marginal rate (20% or 40%)

• Example: A €100 AVC only costs €60 (if you’re a higher rate tax payer)

2. AVCs Increase Your Retirement Pot

• AVCs will have a direct impact on the amount you will receive as a tax free lump sum and / or the income you receive in retirement.

3. AVCs Are Flexible and Affordable

You decide:

• How much to contribute

• How to pay - through salary or bank account

• Whether to pay monthly, annually, or through lump sums

• When to increase, reduce, or pause contributions

4. AVCs Provide Investment Growth Potential

AVC funds are typically invested to grow over time. You can choose from:

• Existing Employer AVC - same provider, same fund

• Private Investment in an AVC PRSA - any provider, any fund

What Is an AVC PRSA?

An AVC PRSA (Personal Retirement Savings Account) is an alternative way to make additional contributions outside your main occupational pension.

It’s ideal for people wanting

• Diversify their existing pension portfolio

• Potential for higher returns

• Access to a wider range of options

AVC PRSA vs Traditional AVCs:

Investment Range:
Traditional AVCs often have a limited selection of investment funds, usually tied to your employer’s pension provider.

In contrast, AVC PRSAs generally offer a broader range of investment options, including global funds, ethical investments, and varying risk levels.

Tax Relief:
Both traditional AVCs and AVC PRSAs offer the same valuable tax relief—up to 40% depending on your marginal rate of income tax.

Flexibility for Job Changers:
Traditional AVCs can be restrictive for people who change jobs or sectors. AVC PRSAs are more flexible, making them a better choice if you want control over your pension even as your career evolves.

Example:

John, 35 earning €50,000 per year.

Enrolled in his companies DC pension with a 5% Employer (ER) and 5% Employee (EE) contribution.

Based on Johns age and income he can contribute up to 20% of €50,000 or €10,000 per year.

He has already invested 5%, and received 5% from his employer which we can exclude for John’s personal limits.

John can invest an additional 15% or €7,500 via an AVC within his employers scheme or AVC PRSA with any investment provider.

Get Expert AVC Advice from Financial Health

At Financial Health, we help clients across Ireland assess whether AVCs or an AVC PRSA is the best fit for their retirement planning goals.

Whether you’re a public sector worker or a private sector employee, we’ll help you:

• Maximise pension tax relief

• Choose the right investment strategy

• Plan for early or phased retirement