RETIREMENT
PLANNING
People’s experience of retirement varies, but one thing that is definite is that people who plan for their retirement find the experience more rewarding, less daunting and full of opportunities.
Happy and fruitful retirements are based on preparation of mind, attitudes and body – and the sooner the preparation begins, the better. Research shows that those who plan for retirement live longer and are more content than those who do not. We believe that a planned retirement is a happy retirement.
How can we help you plan for your retirement or review your retirement options?
When you retire, you can usually take a part of your pension fund as a tax-free lump sum. Then, if you meet certain conditions, you may also be able to choose what you want to do with the rest of your fund. You can:
- Use it to buy an annuity (that is, a regular income for the rest of your life);
- Reinvest it in an approved minimum retirement fund or approved retirement fund; or
- Take the rest of the fund as taxable cash
RETIREMENT LUMP SUM
At retirement, everyone has the option of taking a retirement lump sum. Most people take the maximum amount allowed under this option. The level of retirement lump sum you can take will depend on the type of pension plan you have and your personal circumstances.
The current maximum retirement lump sum you can receive tax free from all your pension plans is €200,000. Retirement lump sums between €200,000 and €575,000 will be subject to standard rate income tax. Any retirement lump sums greater than €575,000 will be taxed at your marginal rate, the Universal Social Charge (USC), PRSI (if applicable) and any other taxes or government levies applicable at that time will also be due.
BUY A PENSION FOR LIFE (ANNUITY)
A pension for life also known as an annuity, is a regular income paid to you for the rest of your life. Your regular income stops when you die unless you choose an option which continues this payment. Your pension income is taxed at your highest rate on withdrawal as well as USC and any other taxes or government levies due at that time.
REINVESTING YOUR PENSION FUND
With certain types of pension plans, you may be able to reinvest some or all of your pension fund in an Approved Retirement Fund (ARF) and withdraw money as you want, depending on certain restrictions. An ARF allows you to continue investing when you retire, you can manage and control your retirement fund and can invest in a wide range of investment funds.
If you have chosen the ARF route but do not have a guaranteed pension income for life of at least €12,700 per annum, you must invest €63,500 in an Approved Minimum Retirement Fund (AMRF) or buy a pension with that amount. The main difference between an AMRF & an ARF are the restrictions placed on taking withdrawals from your AMRF.
TAXABLE CASH
Depending on the type of plan you have, you may be able to take the rest of your fund, in one go (after the retirement lump sum) in one go. You will need to pay income at your highest rate, USC, PRSI (if applicable) and any other taxes at the time.
Depending on whether you have a Company Pension, Personal Pension, PRSA, Additional Voluntary Contributions (AVCs), Buy Out Bond/Personal Retirement Bond, your options will vary. There are advantages and disadvantages to each option, and depending on your personal circumstances, we will help you choose the right option for you.