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Additional Voluntary Contributions (AVCs)

AVCs, or Additional Voluntary Contributions, are optional payments made by employees to enhance their pension benefits. They work alongside a pension scheme and offer tax advantages, helping individuals increase their retirement income or tax-free lump sum.

What’s in this guide?

What is an AVC?

How does an AVC work?

What are the benefits of making AVCs?

Paying additional voluntary contributions

Are AVCs tax free?

Withdrawing your AVC pension

Useful Links / Documents

Common Questions about AVCs in Ireland (FAQ)

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What is an AVC?

Additional Voluntary Contributions (AVCs) are supplementary pension payments made voluntarily by an individual in addition to their regular pension contributions.

AVCs are typically associated with occupational pension schemes, where an employee is enrolled in a pension plan provided by their employer. Under such schemes, the employee is usually required to contribute a specified percentage of their salary, as outlined in their employment contract.

In many cases, the employer also contributes to the scheme, often by matching the employee’s contributions up to a predetermined limit.

How does an AVC work?

How an AVC Works

An Additional Voluntary Contribution (AVC) allows employees to make extra contributions to their occupational pension scheme in order to enhance their retirement benefits.

These contributions are made at the employee’s discretion and are typically deducted directly from salary. AVCs qualify for income tax relief at the individual’s marginal tax rate, subject to Revenue limits, making them a tax-efficient method of increasing pension savings.

The funds are invested and grow tax-free until retirement. At retirement, AVCs can be used to:

Increase the tax-free lump sum,
Purchase an annuity,
Invest in an Approved Retirement Fund (ARF),
Or a combination of these options.

AVCs offer flexibility in both contribution levels and retirement planning, making them a valuable tool for improving pension outcomes.

What are the benefits of making AVCs?

Benefits of Additional Voluntary Contributions (AVCs)

Tax Efficiency
AVCs qualify for income tax relief, meaning you can reduce your tax bill while saving for retirement.
Enhanced Pension Benefits
They allow you to increase your retirement fund, potentially resulting in a higher pension income or a larger tax-free lump sum.
Contribution Flexibility
You can start, stop, or change your AVC payments at any time, offering flexibility to suit your financial circumstances.
Tax-Free Investment Growth
The money invested through AVCs grows free from tax, helping your savings accumulate more effectively over time.
Bridging Gaps
AVCs are useful if you’ve had breaks in employment, worked part-time, or joined a pension scheme later in your career.
Early Retirement Support
If you’re aiming to retire early, AVCs can help bridge the gap by supplementing your income.
Choice at Retirement
At retirement, you have several options for using your AVCs – including taking part as a lump sum, buying an annuity, or investing in an ARF.
Greater Control
AVCs give you more say in how much you save and how your retirement benefits are structured.

Paying additional voluntary contributions

How to Make Additional Voluntary Contributions (AVCs)

Making AVCs is simple and can be a smart way to boost your retirement savings. Here’s how to get started:

1. Check Your Eligibility

AVCs are available to members of occupational pension schemes. Make sure you’re enrolled in your employer’s scheme before proceeding.

2. Speak to Your Employer or Pension Provider

Contact your HR department or pension provider to learn how AVCs work within your scheme. They’ll provide the necessary forms or access to an online platform.

3. Choose Your Contribution Amount

Decide how much you want to contribute. AVCs are flexible — you can increase, reduce, or stop them at any time. Contributions qualify for tax relief, up to Revenue limits.

4. Set Up Payroll Deductions

Most AVCs are deducted directly from your salary, making it easy to manage and ensuring tax relief is applied automatically.

5. Select Your Investment Options

Choose from a range of investment funds offered by your pension provider. You can pick based on your risk level and retirement goals.

6. Review Regularly

Check in on your AVCs regularly to make sure they still suit your needs and take advantage of any changes in tax or pension rules.

Are AVCs tax free?

AVCs (Additional Voluntary Contributions) are not entirely tax-free, but they come with significant tax advantages that make them highly attractive for retirement planning.

Tax Relief on Contributions

AVCs may qualify for Income Tax relief at 20% or 40%, depending on your taxable income and available relief. Your ordinary employee pension contributions and AVCs share an age-related contribution limit. The maximum annual earnings taken into account for pension tax relief are €115,000.

Age	Maximum percentage of earnings eligible for relief
Under 30	15%
30–39	20%
40–49	25%
50–54	30%
55–59	35%
60 and over	40%

These are the standard age-related limits. Employee pension contributions do not qualify for relief from USC or PRSI. Other Revenue limits may also restrict how much can be contributed or provided in retirement benefits.

Tax-Free Investment Growth

Once invested, your AVCs grow free from tax. This means no income tax, capital gains tax, or DIRT is applied to investment returns while your funds remain in the pension.

Tax Treatment at Retirement

AVCs may help fund your retirement lump sum where your main scheme does not already provide the maximum permitted amount. Your entitlement depends on your main pension scheme, salary, service and chosen retirement option. AVCs do not automatically provide a separate 25% tax-free lump sum.

A lifetime €200,000 tax-free limit applies to retirement lump sums from all sources, taking account of previous lump sums.

Tax depends on how you take the remaining benefits. Annuity income and taxable cash payments are subject to the applicable taxes. Transferring eligible funds directly into an ARF does not itself create an immediate Income Tax charge; subsequent withdrawals and deemed distributions are taxable under the relevant rules.

Summary

Contributions → Tax relief available
Growth → Tax-free while invested
Withdrawals → Partly tax-free, balance taxed as income

For tailored advice on tax relief and pension planning, consider speaking to one of our qualified financial advisors, today.

Withdrawing your AVC pension

AVCs are additional savings linked to your occupational pension. Benefits are generally taken at the same time as the main pension benefits relating to that employment.

Early access may be available where you qualify for early retirement under the scheme’s rules and Revenue requirements. Occupational schemes may permit early retirement from age 50, normally requiring you to leave the relevant employment. Separate rules apply to ill-health retirement.

At retirement, AVCs may be used to fund any shortfall in your permitted retirement lump sum. Depending on the applicable rules, the remaining AVC fund may be used to purchase an annuity, transferred to an Approved Retirement Fund (ARF), or taken as taxable cash.

Your options depend on your main scheme’s benefits and your circumstances. Ask the scheme administrator or a qualified financial adviser to confirm your entitlement before taking benefits.

Useful Links / Documents

Find your old Workplace Pensions

Sign-up and find all of your pensions.

Common Questions about AVCs in Ireland (FAQ)

Are AVCs a good investment?

Are AVCs a Good Investment?

AVCs (Additional Voluntary Contributions) can be a smart and tax-efficient way to grow your retirement savings — especially if you’re looking to make the most of your pension benefits.

Why AVCs Can Be a Great Investment

Tax Savings

Contributions may qualify for Income Tax relief at 20% or 40%, subject to your taxable income and applicable contribution limits.
Investment returns within an approved pension arrangement are generally exempt from Irish tax while retained in the pension. Investment growth is not guaranteed.
AVCs may help fund any shortfall in your permitted retirement lump sum. They do not automatically provide a separate 25% tax-free lump sum. Your entitlement depends on your main scheme and retirement option, with a lifetime €200,000 tax-free limit across retirement lump sums from all sources.

Stronger Retirement Income
AVCs help fill gaps in your pension and can boost your income in retirement — particularly helpful if you’ve had breaks in employment or want to retire early.

Flexible Retirement Options
Choose how to access your AVCs at retirement — as a lump sum, through an annuity, or by transferring to an Approved Retirement Fund (ARF).

Things to Keep in Mind

AVCs are a long-term investment — access is generally restricted until retirement.
Investment values can rise and fall, depending on market performance.
Annual tax relief limits apply based on your age and earnings.

Is an AVC Right for You?

For many people, the answer is yes — especially if you want to maximise tax relief and strengthen your retirement income. To make the best decision for your circumstances, we recommend speaking with a qualified financial advisor.

Need advice? Contact us today to learn more about how AVCs could work for you.

What Can AVC Funds Be Used For?

Your AVC (Additional Voluntary Contributions) fund gives you flexibility at retirement. Depending on your needs and circumstances, you can use it in several ways:

Take a Tax-Free Lump Sum

AVCs may help fund your retirement lump sum where your main scheme does not already provide the maximum permitted amount. Your entitlement depends on your main pension scheme, salary, service and chosen retirement option. AVCs do not automatically provide a separate 25% tax-free lump sum. A lifetime €200,000 tax-free limit applies to retirement lump sums from all sources, taking account of previous lump sums.

Invest in an Approved Retirement Fund (ARF)

Move your AVCs into an ARF to keep your pension invested and draw income as needed. This option gives you control and flexibility during retirement.

Buy an Annuity

Use your AVC to purchase an annuity, which provides a guaranteed income for life — ideal for those who prefer financial certainty.

Take a Taxable Lump Sum

In some cases, you can take the remaining AVC balance as a lump sum, though this portion will be subject to income tax, USC, and possibly PRSI.

Fill Pension Gaps or Retire Early

AVCs can help top up your main pension, fill any shortfalls, or make early retirement more financially viable.

Not Sure What’s Right for You?

Everyone’s retirement goals are different. A qualified financial advisor can help you make the most of your AVCs.

Talk to us today to explore your options.

Can I change my AVC contributions?

Yes, you can. One of the key benefits of AVCs (Additional Voluntary Contributions) is flexibility — you’re in control.

You can:

Increase your contributions to grow your pension faster
Decrease them if your financial situation changes
Pause or stop contributions at any time
Resume payments whenever you’re ready

Changes can usually be made through your employer or directly with your pension provider, depending on how your AVC is arranged.

Review your AVCs regularly to ensure they still match your retirement goals and make the most of tax relief opportunities.

Questions? Get in touch — we’re here to help.

What are the disadvantages of an AVC?

AVCs (Additional Voluntary Contributions) are a powerful tool for boosting your pension, but they may not be right for everyone. Here are some potential drawbacks to consider:

Limited Access to Funds

AVCs are intended for retirement and cannot normally be withdrawn on demand. They are generally taken with your linked occupational pension. Access before normal retirement age may be possible through qualifying early retirement or ill-health retirement, subject to scheme rules and Revenue requirements.

Investment Uncertainty

AVC funds are usually invested in the market, so their value can go up or down over time. There’s no guaranteed return.

Tax on Withdrawals

Although you can take part of your fund tax-free, the remainder will be taxed as income, including USC and possibly PRSI.

Complex Rules

Pension rules can be tricky. Limits, tax rules, and retirement options vary depending on your age, income, and scheme type.

No Employer Top-Up

AVCs are made entirely by you. Your employer doesn’t match these contributions like they might with your main pension.

The Bottom Line

AVCs offer real advantages, but they’re not a one-size-fits-all solution. Make sure they align with your goals — and if in doubt, speak to a qualified financial advisor.

Want help weighing your options? Reach out to us — we’re happy to guide you.

Can I pay a lump sum into an AVC?

Yes — you can. AVCs (Additional Voluntary Contributions) don’t have to be regular monthly payments. You can also make a once-off lump sum contribution at any time.

Why Consider a Lump Sum?

Boost your pension savings quickly
Make use of a bonus, inheritance, or surplus cash
Catch up on missed contributions
Maximise your tax relief before the end of the tax year
Strengthen your pension if you’re planning to retire early

What to Keep in Mind

Your contribution must stay within Revenue limits to qualify for income tax relief
You may need to submit a tax return via Revenue’s myAccount or ROS to claim relief on a lump sum
A once-off AVC contribution made after the end of a tax year may qualify for tax relief for the previous tax year, provided the contribution is paid and the claim is made within Revenue’s applicable deadline.

Want to Make a Lump Sum Contribution?

It’s a great way to top up your pension — but getting it right is key. A quick chat with a financial advisor can help ensure you maximise your benefits.

📞 Talk to us today if you’re considering a lump sum AVC.

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