Should I make AVC Pension Contributions Ireland? How do returns compare?

AVC Pension Contribution
AVC Pension Contributions

With lockdowns limiting options for spending last year, legions of ‘accidental savers’ were created across the country. This has opened up the opportunity for many to make AVC pension contributions in Ireland.

Saving deposits nationally reached a record €126 Billion, up by €15 Billion. With 44% of people saving over €5,600 in that period.

All this means while the pandemic brought financial hardship to some, others have found themselves with an unexpected savings nest egg. 

  1. Need for returns – AVC Pension Contributions Ireland
  2. We have lift off – AVC Pension Contributions Ireland
  3. Sound too good to be true? – AVC Pension Contributions Ireland
  4. Pensions unpacked – AVC Pension Contributions Ireland
  5. What does that mean for you? – AVC Pension Contributions Ireland
  6. What’s next? – AVC Pension Contributions Ireland

So if you need the lowdown on how increasing your AVC pension contributions compares to other investment options you have come to the right place!

Need for returns – AVC Pension Contributions Ireland

With banks looking to start charging savers to keep their money in the bank and inflation on the horizon, many Irish savers are looking for ways to protect and grow that nest egg.

Savers across Ireland have ploughed money into the old favourite residential property. This rush coupled with limited supply has pushed property rents and prices higher, up 3.7% this year. The new favourite seems to be crypto currencies, with Irish savers investing 92% more than savers in Britain, France and Spain.

Putting all your eggs into one basket is never wise, but especially when your basket swings wildly back and forth. Both property and crypto currencies are famously volatile. Even these risky options might not yield the mega returns investors are seeking as the revenue will take between 33% and 41% of your returns in tax.

The magic of investing is in the mathematical process of compounding. When applied to returns, 20% growth per year = doubling your money every 4 years.  

Albert Einstein is reported to have said “The most powerful force in the universe is compound interest”.

Business Insider

Tax though acts like a handbrake on returns, slowing speed your savings take off. So what to do?

We have lift off – AVC Pension Contributions Ireland


What if I was to tell you that there is an investing vehicle that is fully regulated, 100% tax free and has delivered returns of 8.24% per year on average for the last 36 years.

Turning a €10,000 of savings into €60,000 of savings in that time.  Even better, what if I was to tell you in many cases your employer will double your money turning your savings into €120,000.

Sound too good to be true? – AVC Pension Contributions Ireland

Well it’s not, because what I’ve just described is called a pension. Stay with me here, the humble pension is the most under appreciated investment opportunity ever. Getting a private pension or increasing your AVC pension contributions is the best way to maximise that opportunity.

It’s secret sauce is that because it’s sheltered from tax it can unleash the full force of compound interest, growing your wealth exponentially. It’s also not as complex as some like to make out.

Pensions unpacked – AVC Pension Contributions Ireland

As long as you are ok to commit your savings and returns until a certain age, which can be as early as 50 in some cases, the tax man will let you have 100% of the returns. That’s all a pension is, a committed tax free savings pot [1].

If you start up a private pension, you are creating your own private tax shelter, when you look at it like that why wouldn’t you maximise your AVC pension contributions?

What you invest in that savings pot: cash, gold, shares, property, crypto etc.. is entirely up to you, as is the level of risk.

What does that mean for you? – AVC Pension Contributions Ireland

If you have any savings, seriously consider starting a private pension, or if you have a pension through work increase your AVC pension contributions. There is a real opportunity for some coming out of lockdown to secure their financial future.

The good news is you don’t have to do all the financial planning yourself, initial financial advice from a financial advisor is usually free according to Brendan Nordon of DFP Pension & Investments.

Brendan Nordon Colour Avatar

“Getting financially fit is really important and now is a great opportunity to put yourself on the right path. We can help advise on what option is the right one for you.”

Brendan Nordon DFP Pensions & Investments

If you are one of the 44% of Irish people to have put extra money by during lockdown, don’t waste it. Talk to a financial advisor and they will help get you started today.

What’s next? – AVC Pension Contributions Ireland

If you want to know more about our saving and financial planning you can read our guides here.

If you want to talk to a financial advisor about your pensions check out our recommended financial advisors here.

If you want to know about transferring your defined benefit pension to a defined contribution pension you can check out Brendan’s article on the subject here.

How do I choose a great financial advisor?

financial advisor

The challenge though is which financial advisor to choose?

As an industry insider, who helped run these services at one of Ireland’s leading banks, I saw this from the advisor’s angle. But as someone who actually used financial advisors for my own financial planning, I recognised this was also a big challenge for Irish consumers. Getting the right money advice is important.  

Choosing the best financial advisor 

The quality of advice you receive can make a big difference to your financial outcomes and therefore your life outcomes. So it is an important decision worth researching carefully.

The financial advice world in Ireland is quite murky, full of confusing and sometimes misleading terms, unclear commission arrangements and limited online pricing information. A recent survey said that over 50% of Irish people didn’t think their advisors had their best interests in mind and 61% thought their advice was commission driven. [1]

Although there are many great advisors in Ireland who deliver a great service for their clients, the light touch regulatory approach in Ireland, puts the weight of picking a great advisor firmly on your shoulders as an Irish consumer. 

To help you make the right choice, in this article we will cover your financial planning needs, the types of financial advisor and their pro’s & con’s.       

Understanding your financial advice needs

How to choose the best type of financial advisor for you

4 key things to look out for in picking your financial advisor

How do moneysherpa rate financial advisors?

Financial advisors, next steps

Understanding your financial advice needs

004 money needs

The type of advisor that’s best for you will depend on your particular advice needs. Not just the subject of the advice, retirement, investment, mortgage etc.. or the size or complexity of the advice.

Most agents are able to cover all of these bases successfully, the key to finding the right advisor is understanding how much of an active role you want to play in your financial decision making. 

A recent study by Forrester split people seeking financial advice into three broad types [2]

  • DIY’er, confident in financial ability and happy to go it alone.
  • Validator, confident in overall financial direction, but want to check and fine tune with advice.
  • Delegator, less confident or time poor, but know financial planning is important so outsource it to someone they can trust.

Which type you are is probably the single most important factor in choosing the right type of financial advisor for you.

How to choose the best type of financial advisor for you 

004 advisor type

There are three main types of financial advice available in Ireland, each more or less suited to DIY’ers, Validators and Delegators.

Robo advice

  • Best fit for: DIY’ers who don’t need require one on one advice and like the low fees.
  • What is it: Automated data driven financial advice based using algorithms and artificial intelligence to assess client needs and recommend best financial strategies.
  • Pricing: Low/No cost advice fee model, typically less than 1%.
  • Providers: Growing quickly in US (betterment) and UK markets (mint), still limited choice in Irish market

Independent advice (whole market, fair analysis)

  • Best fit for: Validators with large or complex financial requirements, looking for once off upfront focussed advice.
  • What is it: One on one advice, based on needs and evaluation of all financial options in market.
  • Pricing: Varies, but mainly upfront fixed fees of €2,000- €5,000, not subsidised by commission on products sold.
  • Providers: Typically, specialised firms due to high cost of regulation and providing depth of advice. 

Focused advice (multi-agency, restricted, tied advice)

  • Best fit: Validators and Delegators, with more mainstream financial advice needs.
  • What is it: One on one advice, based on needs and evaluation of financial options from a reduced set of products.
  • Pricing: Varies, but often 0%-1% of investment upfront and around 1.5% of funds managed per year.
  • Providers: Specialist local advice firms, Bank tied agents and Insurance tied agents. 

4 key things to look out for in picking your financial advisor


Whatever type of advisor is right for you, there are some key things to look out for.

Are they competent?

Is the advice you are going to get any good. Although it’s by no means perfect, the best way to judge this is on their track record. For example, how have the funds they have invested current clients actually performed versus the market. What is the experience of the advisor and investment team.

Are they comprehensive?

If they are a multi, restricted or tied agency what range of options do they have available. Have they got access to a wide range of funds and how did they pick them? It might be that they are only restricted in products that aren’t relevant or that they have weak options where it matters to you. 

Are they compromised?

In the UK the FCA have banned the practice of speaking up commissions to advisors to incentivise them to push particular products. In Ireland this practice is still allowed, but commission information has to be shared with clients. Does the commission your advisor receive potentially sway their advice or does it align with your interests as a customer? 

Are they cheap?

Given the importance of getting good advice and its potential impact on your financial outcomes,  this is the least important of the 4 factors. However, if the advisor is competent, comprehensive and not compromised why not drive a hard bargain before signing up? Often advisors have some flexibility on the pricing they first propose to you.

How do moneysherpa rate financial advisors?


At moneysherpa, we weight the 4 criteria above. plus some additional ‘hygiene’ factors to come up with an overall recommendation score for each advisor in your area.

  • Competence: Based on past performance and advisor experience. (40%) 
  • Comprehensive: Based on access to the best funds and financial instruments. (30%)
  • Compromised: Based on the alignment between your interests and the advisor. (20%)
  • Cheap: Based on pricing data collected by the moneysherpa team. (10%)
  • Hygiene: Based on Authorisation, Indemnification, Complaints data and Qualifications.

To feature on our list of recommended advisors agents have to pass all of our ‘Hygiene’ tests and are then ranked out of 5 according to the weighting shown on the 4 C’s advisor rating criteria listed above.

Financial advisors, next steps

Whether you are a DIY’er, Validator or Delegator we hope this article helped you cut through the fog around financial advisors in Ireland and help you choose the right option for you.

Click here to go to our comparisons of financial advisors overall and by each investment type.

or choose your region below to find a recommended advisor near you.

Although there is no one size fits all solution, by presenting the facts and being transparent about the differences between providers we hope to make getting a great financial advisor a whole lot simpler.

We also have lots of other financial help, guides and resources. The sherpa’s 6 steps is a great place to start or our guides & tips area.

Expert private pension advice Ireland: Should I transfer my Defined Benefit pension to a Defined Contribution pension?

Defined Benefit Transfer Value
private pension advice

If you have a Defined Benefit (DB) Pension then you might have been offered the option to transfer this into the more common type of pension (Defined Contribution). This is called a Defined Benefit transfer. This is a big decision and an irreversible one, so it’s important to understand exactly what this means, and what the pros and cons might be.

As a qualified actuary and someone who has been providing Irish private pension advice to clients in Ireland for over a decade I can help steer you in the right direction.

In this article we will explain some of the key details, explain why this transfer is more attractive than ever and also explain the downsides to consider. If after reading you have an interest in exploring a transfer further I’ll point you in the right direction.

What is a Final Salary/Defined Benefit Scheme, Irish private pension advice?

What are the Key Benefits of a DB pension, Irish private pension advice?

What are the key Drawbacks of a Defined Benefit pension, Irish private pension advice?

What is a Transfer Value?

How are transfer values calculated, Irish private pension advice?

Why are current Transfer Values at record highs, Irish private pension advice?

How long will Transfer Values be at this rate, Irish private pension advice?

What are the key things I need to consider before transferring my Defined Benefit pension?

Transferring in a nutshell Irish private pension advice

I may be interested, where can I get further Irish private pension advice?

What is a Final Salary/Defined Benefit Irish private pension scheme? Advice

A defined benefit or DB Pension (also known as final salary pension) is a type of workplace pension. Instead of building up a pension pot over time, it provides you with a guaranteed annual income for life, based on your final or average salary.

DB pensions are most often provided by the public sector and government employers. Some private sector employers do still offer them yet many the private sector schemes have ceased accruing benefits for future service. A DB Pension is sometimes seen as the most attractive pension arrangement for employees. Read on for Irish private pension advice on the pro’s and con’s of transfers.

What are the Key Benefits of a DB Irish private pension? Advice

DB pensions are often seen as more generous, because it would take an above average defined contribution (DC) pot to be able to pay the same regular amount.

What’s more, the payouts from a DB pension is guaranteed for the rest of your life. So long as the pension scheme remains funded, your pension income is paid no matter how long you live. There is also a spouses pension in the event of death.

pig balance

What are the key Drawbacks of a Defined Benefit Irish private pension? Advice

Despite the attractions of a DB pension, in some ways it is not as flexible as a DC pension pot. You can’t vary the income you take from it, or draw out larger lump sums (with some exceptions).

The DB pension can’t be inherited by your beneficiaries. If you die prematurely, there will be a widow’s/widower’s pension for your spouse, but most of the benefits will be lost, and nothing passes to your estate.

Also, there is also a risk that your pension scheme may collapse at some future point, if it is no longer adequately funded (e.g. employer becomes insolvent).

002 transfer

What is a Transfer Value for an Irish private pension? Advice

You can ‘trade in’ a DB pension for a fixed-size pot of the kind found in defined contribution (DC) pension schemes. That ‘transfer value’ is calculated to estimate the monetary amount needed to provide the same guaranteed income, based on current market conditions.

Taking a transfer value involves giving up the certainty of income for life to directly take control of the investment behind the defined benefit pension. You would then use the fund under a defined contribution arrangement to provide an income over the course of retirement.

The transfer option offers greater flexibility on how you take your benefits at the expense of certainty.

There are significant risks, in particular, investment risk with taking the transfer value and professional advice should be sought before making this decision. 

The key risks in transferring to a DC pension are:

· The value is subject to investment performance, so there is risk of capital loss

· The investment performance is worse than anticipated the value might not be enough to meet your needs.

· If you live longer than you provided for.

pig savins

How are transfer values calculated for an Irish private pension? Advice

The transfer value’s being offered are based on the yield on long-term government bonds. These bond yields have fallen in recent times. This has resulted in a significant increase in the transfer value being offered to pension members. 

That’s why members of existing defined benefit pensions now need to reassess whether transferring the DB pension, that was once seen as untouchable, is now a realistic option.

Why are current Transfer Values at record highs for Irish private pensions?

The defined benefit transfer value is calculated under guidance from Pensions Authority and Society of Actuaries in Ireland. A factor called the Market Value Adjustment (MVA) is used to reflect economic conditions at the time of calculation.

pension transfer

The MVA is calculated based on an agreed measure of long -term government bond yields. The graphic below shows how this yield has changed over the past 10 years and how the MVA adjusts for it. 

The table shows that as the yields fell from 3.83% in December 2010 to -0.29% in December 2020. This has resulted in an increase in the MVA over the same period from 109% to 169% (up 56%).

Source: Society of Actuaries – MVA Factor. Data from 31st October 2010 to 31st October 2020

How long will Transfer Values be at this rate for Irish private pensions? Advice

Negative yielding government debt now amounts to a record E17.2trn, the vast majority of which in the Eurozone bond markets. 

This is driven by the ECB rate policy and Quantitative Easing (QE), which involves Central Banks increasing the money supply. The thinking behind these policies is to stimulate the european economy.  

With QE measures in place and forward guidance implying no change in interest rates for the next 3 years, it is clear that bond yields will remain ‘captive’ to these extraordinarily low levels for some time to come.

maze pig

What are the key things I need to consider before transferring my Defined Benefit pension? Advice

As well as the transfer value on offer, these are the other things you need to consider: 

· Does the flexibility of the transfer value meet your requirements in retirement?

· Do I want to manage my own wealth and the investment risk that this incurs?

· Do you want to pass on your wealth to your kids?

· How secure is your current Defined Benefit scheme?

· How does the decision fit in with your other non pension assets and income?

Transferring in a nutshell, Irish private pension advice

Transfer values are at record highs due to market conditions, even if it didn’t make sense to transfer before it may do now.

Defined benefit pensions have a number of major advantages, mainly that the benefits are in theory guaranteed, but that’s not always the case.

Defined contribution pensions are generally more flexible in how you can take your benefits, but offer no guarantees on return.

Now that transfer values are relatively high the decision around transferring centres on the priority of flexibility versus certainty for your individual circumstances. That’s why it makes sense to get Irish private pension advice if your are considering a transfer.

pension 1

I may be interested, where can I get further Irish private pension advice?

You should take independent qualified financial advice before deciding to transfer. This advice is usually free. If after taking advice you decide to transfer Irish private pension advisors typically receive a commission from your new pension provider.  

You can check out our recommended list of Irish private pension advisors in your area here. The list only includes fully qualified financial advisors regulated by the Central Bank of Ireland.

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