AVC Guide Ireland 2026 — How Additional Voluntary Contributions Work

If you're a member of an occupational pension scheme — a company pension provided by your employer — you can make Additional Voluntary Contributions (AVCs) to boost your retirement pot beyond what your scheme provides. AVCs are one of the most tax-efficient savings mechanisms available to Irish employees, yet they're underused, partly because many people don't know they exist and partly because the options can be confusing.

This guide covers how AVCs work, the tax relief available, the difference between scheme AVCs and an AVC PRSA, and when one is better than the other.

What Are AVCs?

An Additional Voluntary Contribution is exactly what it sounds like — a voluntary extra contribution to your pension, on top of your compulsory scheme contributions. If your employer's pension scheme requires you to contribute 5% of salary, you might contribute an additional 5% in AVCs. Both get the same income tax relief.

AVCs can be made as regular deductions from your payslip (most common and easiest) or as one-off lump sums — particularly useful for catching up with unused relief from previous years.

Tax Relief on AVCs

AVC contributions get income tax relief at your marginal rate, subject to the same age-related limits that apply to all pension contributions. The limit is calculated on your combined contributions — your compulsory scheme contributions plus AVCs — as a percentage of your pensionable earnings (capped at €115,000).

Your age	Total max pension contribution (% of earnings)
Under 30	15%
30–39	20%
40–49	25%
50–54	30%
55–59	35%
60+	40%

Example: You're 45, earn €70,000, and your employer scheme requires you to contribute 5% (€3,500). Your total limit is 25% of €70,000 = €17,500. You've already used €3,500 in compulsory contributions. You can contribute up to €14,000 in AVCs and get income tax relief on all of it. At 40% tax rate, that €14,000 AVC costs you €8,400 out of pocket (the other €5,600 is tax you'd have paid anyway). PRSI and USC are not saved.

Using Unused Relief From Previous Years

Revenue allows you to make AVC contributions that relate to unused relief from prior tax years — up to the previous 5 years. This "carry-back" provision means you can make a large one-off AVC in a tax year and claim some of that relief against prior years. This is particularly valuable in years when you have a cash windfall (a bonus, an inheritance, a property sale) and want to shelter some of it from tax efficiently.

Scheme AVCs vs AVC PRSA — Two Different Structures

If you're in an occupational scheme, you typically have two ways to make AVCs:

Option 1 — Scheme AVCs (In-Scheme)

Many occupational schemes allow you to make AVCs directly into the scheme. Your contributions are deducted from payroll alongside your regular contributions.

• Simple — no separate account to manage
• Relief comes automatically through payroll (you don't need to claim it separately)
• Fund choice is limited to whatever funds the scheme offers
• Your AVC fund is tied to the scheme — you can't move it while still employed by that employer
• On leaving the employer, AVCs in the scheme move with your main benefits (to a deferred pension, transfer, or retirement depending on your circumstances)

Option 2 — AVC PRSA (Standalone)

Alternatively, you can set up a standalone PRSA specifically to receive AVC contributions. This is called an AVC PRSA. Your employer must facilitate payroll deduction into it — they are legally required to do so if you request it (Pensions Act 2002).

• Wider fund choice — access to the full range of funds available on the PRSA provider's platform
• Fully portable — the PRSA belongs to you and goes with you when you leave the employer
• Can be accessed as a Vested PRSA from age 50 (unlike many scheme AVCs)
• Slightly more administration — separate account, separate statements
• You claim the tax relief through your tax return (if not handled through payroll), or arrange payroll deduction

AVC PRSA — The Vested PRSA Advantage

Since Finance Act 2023, a PRSA (including an AVC PRSA) can be accessed from age 50 as a Vested PRSA — without leaving employment. This is a significant advantage over in-scheme AVCs, which are generally only accessible when you leave the employer or retire from the scheme.

In practice, this means an AVC PRSA can be used as a tax-efficient savings vehicle that you start drawing down from 50, while you continue working. The interaction with ARF drawdown and income tax planning makes this a sophisticated but genuinely powerful strategy for those who plan ahead.

Defined Benefit vs Defined Contribution — Does It Matter for AVCs?

Yes. If you're in a defined benefit (DB) scheme (common in the public sector and some large employers), your main pension is calculated based on salary and service — not on a pot of money. Your AVCs sit in a separate defined contribution pot alongside the DB promise. At retirement, you can use the AVC pot to provide additional tax-free cash (if you haven't already used your maximum entitlement under the DB scheme rules) or transfer to an ARF.

In a defined contribution (DC) scheme, both your regular contributions and AVCs go into your personal pot and are invested in the same way. Structurally simpler, but you bear the investment risk on both.

How Much Should You Be Contributing in AVCs?

There's no single right answer — it depends on your income, age, existing pension entitlements, and retirement goals. Some useful starting points:

• If you're in a generous DB scheme (e.g., public sector), you may have relatively small AVC headroom — your compulsory contributions may already be close to your age-related limit
• If you're in a DC scheme with modest employer matching, there's usually substantial room for AVCs and significant tax to be saved
• If you're over 50 and behind on pension savings, the increased age-related limits (35–40%) combined with AVCs can allow significant catch-up
• If you received a bonus, consider whether the AVC carry-back provision allows you to shelter some of it from tax