Additional Voluntary Contribution (AVC)

An Additional Voluntary Contribution (AVC) is a top-up payment a member of an Irish occupational pension scheme can make beyond what the employer scheme requires. AVCs sit in a separate sub-account, usually with the same scheme provider, and the member chooses where the money is invested.

The advantage is income-tax relief at the saver’s marginal rate. A higher-rate taxpayer contributing €1,000 reclaims €400 in tax, so the net cost of the contribution is €600 — the other €400 comes from the tax saving. USC and PRSI, by contrast, are charged on gross pay and are not reduced by AVCs.

Relief is capped by age (15% of earnings under 30, rising to 40% from age 60) and by the earnings cap of €115,000 — the cap applies across all pension contributions combined, including employer payments. Self-employed earners and those without an occupational scheme use a PRSA or AVC PRSA instead, which works similarly.

At retirement, AVC funds can be combined with the main scheme to take a 25% tax-free lump sum, with the remainder going into an ARF or annuity. Use the pension contribution calculator to see the net cost and projected pot.