AVCs and Tax Relief
AVCs are a smart and tax efficient way of saving for retirement, as relief from Income Tax is allowed on AVCs at the marginal rate. This means that if a member saves AVCs through their employer as a deduction from salary, the reduction in take home pay is much less than the amount of the AVC you are saving. The following table shows the tax relief on an AVC of €100:
Revenue have limits on the amount of AVCs you can save each year. The maximum amount that you can save towards your pension through regular pension contributions and AVCs each year and still receive tax relief depends on your age. The following table shows these limits:
You will move from one band to the next on 1 January of the tax year which includes the relevant birthday for example if you are 40 in December 2013 you can start contributing at the rate of 25% in January 2013.