Should I cash in pensions?

pavb2

Hi all I know I'm straying in to financial advisor territory but I have 2 company directors pensions. I've just turned 50 and my business is being sold so I will no longer be a director and potentially I can take my 25% lump sum from one or both and buy an annuity or AMRF.

1st pension invested 50k now worth 60k after 12 years

2nd pension invested 100k now worth 75k (45k 5 years ago)

I don't think there is much point getting an annuity as this was quoted at 3% but I do think I can get a better return on the cash if invested elsewhere (eg deposit for UK property)particularly for my 1st pension. It's really what I can do with the cash that appeals to me.

So should I cash in one both or none of the pensions?

SBarrett

Do you need the money? Are you getting money from the sale of your business? You can probably get that out more tax efficiently than a pension (besides tax free cash).

If you just want the tax free cash and leave the rest for later, wind up the pension schemes and transfer them to a PRSA. You can take out the 25% tax-free cash and leave the remainder as a Vested PRSA.


Steven

pavb2

SBarrett wrote: »

Do you need the money? Are you getting money from the sale of your business? You can probably get that out more tax efficiently than a pension (besides tax free cash).

If you just want the tax free cash and leave the rest for later, wind up the pension schemes and transfer them to a PRSA. You can take out the 25% tax-free cash and leave the remainder as a Vested PRSA.


Steven

Thanks SB this is a directors company pension so is it eligible for a vested PRSA?

Not desperate for the money I just think I might get a better return elsewhere no money to speak from the sale of the business.

At the moment my options seem to be take my 15k from pension no 1 and buy an ARF which will pay about 180€ (3%) per month and is not transferable on death this means it will take 20 years to get my remaining 45k out assuming there's no tax.

Take the 15k and buy an AMRF which leaves the rest invested but which I can't touch until I'm 75.

Over the last 10 years myself and the wife have put 250 k into our pensions now worth 200k €. With the benefit of hindsight there's no way I would have put my money in to a pension fund I would have found a better place to invest.

SBarrett

this is a directors company pension so is it eligible for a vested PRSA?

If you wind up the schemes, you can transfer the funds to a PRSA and then draw down the tax free lump sum.

Not desperate for the money I just think I might get a better return elsewhere

You can invest in almost anything through a pension, with virtually no tax (you do have to pay tax on foreign gains). The tax treatment of profits in a pension plan is much better than you will be able to get yourself.

At the moment my options seem to be take my 15k from pension no 1 and buy an ARF which will pay about 180€ (3%) per month and is not transferable on death this means it will take 20 years to get my remaining 45k out assuming there's no tax.

Take the 15k and buy an AMRF which leaves the rest invested but which I can't touch until I'm 75.

I assume you mean annuity at the beginning of this paragraph. But yes, annuity rates are very poor at the moment. You will get about 3.07% for a single life pension, meaning it will take 32 years to get your money back. You can always buy a spouse's pension but that will reduce the rate to about 2.88%.

The ARF would be another option but there is no getting around that ridiculous AMRF requirement (well, having €12,700 in guaranteed income or purchasing an annuity for that amount is two ways :rolleyes: ). You could put it in an ARF and draw out just enough so you pay just PRSI and USC?

Over the last 10 years myself and the wife have put 250 k into our pensions now worth 200k €. With the benefit of hindsight there's no way I would have put my money in to a pension fund I would have found a better place to invest.

A lot depends on the investment strategy. Most funds have recovered since the credit crunch. Mad stuff like any funds with gearing in it or Irish equities are still struggling but almost everything else is back.


Steven

kennyb3

SBarrett wrote: »

I assume you mean annuity at the beginning of this paragraph. But yes, annuity rates are very poor at the moment. You will get about 3.07% for a single life pension, meaning it will take 32 years to get your money back. You can always buy a spouse's pension but that will reduce the rate to about 2.88%.

Steven

Are annuity rates like to improve in the future - i.e. when we finally get out of ZIRP? Or what external factors are the predominant influence?

SBarrett

kennyb3 wrote: »

Are annuity rates like to improve in the future - i.e. when we finally get out of ZIRP? Or what external factors are the predominant influence?

Long term bond rates have the biggest influence. They usually do the opposite of interest rates, so they should be higher at present but QE has pushed them down. I don't know what will happen with QE stops and interest rates go up. Will bond rates fall further or will they stay about the same?


Steven

Paraic OMuir

Combining your total pensions = €135K (60K +75K)
25% tax free cash = €33.75K
The balance is €101.25K
ARMF requirement is €63.5K leaving a balance of 37.75K for an ARF.
You can receive all all gains from the AMRF.
If for example your AMRF made a 5% return for the year you will be able to receive this amount. You are also required to take a minimum of 5% each year from your ARF.

Paraic

pavb2

Paraic OMuir wrote: »

Combining your total pensions = €135K (60K +75K)
25% tax free cash = €33.75K
The balance is €101.25K
ARMF requirement is €63.5K leaving a balance of 37.75K for an ARF.
You can receive all all gains from the AMRF.
If for example your AMRF made a 5% return for the year you will be able to receive this amount. You are also required to take a minimum of 5% each year from your ARF.

Paraic

Thanks Paraic think I'm going to go down this route and have a nice holiday or buy a caravan

toconeell

Any change in the 12700 min requirement to cash in AMRF in 2014 budget

cashflowplus

pavb2 wrote: »

Hi all I know I'm straying in to financial advisor territory but I have 2 company directors pensions. I've just turned 50 and my business is being sold so I will no longer be a director and potentially I can take my 25% lump sum from one or both and buy an annuity or AMRF.

1st pension invested 50k now worth 60k after 12 years


2nd pension invested 100k now worth 75k (45k 5 years ago)

I don't think there is much point getting an annuity as this was quoted at 3% but I do think I can get a better return on the cash if invested elsewhere (eg deposit for UK property)particularly for my 1st pension. It's really what I can do with the cash that appeals to me.

So should I cash in one both or none of the pensions?

Seems like your interested in property did you know you can buy property using your pension?