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Early retirement penalties

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  • 26-09-2013 10:16pm
    #1
    xstriker
    Registered Users Posts: 6 ✭


    Hi,

    Someone recently told me that if a person was to retire with a pension before their normal retirement date, that there is a Govt. penalty of 2% for every year early that they retire.

    For example, if your normal retirement age was 60 and you retired at 55, then 10% (5 x 2%) of your pension would have to be paid to the Govt.

    So, if you were to be entitled to a pension €30,000 you would actually only receive €27,000 which I presume would then be subject to further regular taxation.

    Can anyone shed any light on this?


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    #2
    A New earth
    Registered Users Posts: 551 ✭✭✭A New earth


    Maybe you are being told about Actuarial Reductions. If you retire early you are entitled to a reduced pension based on the years worked, but payable at normal retirement age. If you get this pension from the date you actually retire then the Pension Fund (not the Government unless it's a public servant pension) reduces the pension further to compensate the fund for this early payment. Rate not necessarily 2%, could be say 4%. Sometimes the employer will make an payment to the pension fund so that there is no actuarial reduction (or lower rate) charged to the pensioner.





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    #3
    xstriker
    Registered Users Posts: 6 ✭xstriker


    Thanks, A New Earth,

    I am aware of actuarial reductions which can take place in relation to early retirement, but it was my understanding (based on what I was told) that this 2% to which I referred was not a pension fund/actuarial adjustment, more a Govt. introduced penalty. It sounds ridiculous, but as I am approaching the age where I might be in a position to consider early retirement (if it's offered), I am trying to find out if there is any substance to it.


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