The ABC’s of AVCs: Why Small Pension Decisions Today Can Mean a €1 Million Difference in Retirement

How Three Colleagues Took Different Approaches to Their Pension—and Got Very Different Results

Imagine three colleagues—Adam, Billy, and Ciara—who all work the same job, at the same company, with the same salary. They started at the same age, earned the same promotions, and had identical opportunities throughout their careers. The only difference? How much they contributed to their pensions.

At 31, each of them had €0 in their pension pot. Their employer contributed 5% of their €100,000 salary (€5,000 per year), and they all invested in the same pension fund, which delivered a steady 5% annual return after fees.

Yet, by the time they reached retirement at age 65, Ciara had nearly €900,000 more than Adam—almost double his pension pot! Billy also did significantly better than Adam, simply by making a small Pension AVC (additional voluntary contribution).

Let’s break it down and show just how much of a difference these decisions made.

 

Meet Adam, Billy & Ciara: Same Salary, Same Job, Different Pension Decisions

🅰️ Adam (The Minimum Contributor)

• Employer Contribution: 5% (€5,000 per year)
• Employee Contribution: 5% (€5,000 per year)
• Total Annual Contribution: €10,000
• Total Pension at Age 65: €893,203

Adam decided to stick with the bare minimum. He didn’t contribute anything extra beyond the required 5% employee contribution, relying on his employer’s matching 5%. While this might seem like a decent approach, he ended up missing out on hundreds of thousands of euros.

 

🅱️ Billy (The Smart Saver – Adds a 3% AVC)

• Employer Contribution: 5% (€5,000 per year)
• Employee Contribution: 5% (€5,000 per year)
• Additional Voluntary Contribution (AVC): 3% (€3,000 per year)
• Total Annual Contribution: €13,000
• Total Pension at Age 65: €1,161,164

Billy took a slightly more proactive approach by contributing an extra 3% of his salary (€3,000 per year) in Pension AVCs. That’s only €250 per month, yet it made an enormous difference.

🔹 By the time he retired, Billy had €268,000 more than Adam—just from a small additional investment each month.

 

🅲️ Ciara (The Maximiser – Adds a 10% AVC)

• Employer Contribution: 5% (€5,000 per year)
• Employee Contribution: 5% (€5,000 per year)
• Additional Voluntary Contribution (AVC): 10% (€10,000 per year)
• Total Annual Contribution: €20,000
• Total Pension at Age 65: €1,786,406

Ciara saw the power of compounding growth and decided to maximise her pension potential by contributing an extra 10% of her salary (€10,000 per year) in Pension AVCs.

🔹 By the time she retired, Ciara had a pension pot of €1,786,406—nearly DOUBLE Adam’s savings!

🔹 Compared to Billy, she still had €625,000 more, all because she made slightly larger contributions over time.

 

The €893,000 Lesson: Why Ciara Will Retire Almost €1 Million Richer Than Adam

Let’s put this into perspective. Imagine Adam, Billy, and Ciara retiring at the same time. They sit down to compare their pension pots.

• Adam looks at his €893,203 and wonders if it will be enough to maintain his lifestyle for the next 20-30 years. He may have to downsize his home, reduce his travel plans, or worry about healthcare costs later in life.
• Billy, with €1,161,164, has a more comfortable retirement ahead. His extra AVC contributions mean he can enjoy more travel, better healthcare, and a higher quality of life.
• Ciara, with €1,786,406, is in an entirely different league. She can afford to retire earlier if she wants, enjoy a luxurious lifestyle, and not worry about outliving her savings.

Ciara will retire €893,000 richer than Adam despite having the same job, same salary, and same career path. That’s almost €1 million that Adam left on the table!

 

The Power of AVCs: How Small Contributions Make a Massive Difference

🔹 Billy’s 3% AVC (€250/month) resulted in €268,000 extra in retirement savings.

🔹 Ciara’s 10% AVC (€833/month) grew into an additional €893,000 in wealth.

This shows that even small AVCs—when invested consistently over time—can transform your retirement future.

Why does this happen? Compound growth. Your pension contributions aren’t just savings—they’re investments that generate returns on returns. The earlier and more consistently you contribute, the more your money works for you.

 

What This Means for You

If you’re only contributing the minimum to your pension, you could be missing out on hundreds of thousands of euros. The good news? It’s never too late to start making smarter pension decisions.

What are we forgetting….Tax relief. Each pension contribution made within your age related limits, will be eligible for tax relief at your marginal rate. i.e. A €100pm AVC could cost as little as €60pm

 

Ask yourself:

✅ Can I afford to increase my contributions by even 3% or 5%?

✅ Am I making the most of tax-efficient AVCs?

✅ Do I want to retire comfortably or with financial freedom?

 

Start Maximising Your Pension Today!

💡 Even a small AVC can add hundreds of thousands to your retirement fund.

 

📞 Call us today at 083 440 7829 to schedule your free personalised pension review. 📧 Prefer email? Reach out to [email protected].