Want to retire at 50 but what happens to my pension fund if I leave it til 65

yqtwqxqm

I have a bit of a weird question I wonder if anyone here can answer.
Im 49 and working in the private sector. I have been paying the max avcs possible win the company i am in now and previous comanies. The result is a fairly hefty sum in my pension funds. Defined contribution.

I want to retire next year. My question is ..

If I retire at 50 I have enough savings and investments to keep me going comfortably for several years. I dont envisage needing the pension fund until 65 anyway so am happy to leave it there for now.

But if I retire at 50 and then when it comes to activating my pension what salary is used to determine the max tax free lump sum. Is it the salary I had when I last worked at 50, or is it zero, as i will have no salary the year before i raid the pension fund.

I find it very confusing.

Thanks for any answers.

earlyevening

Tax free lump sum in a defined contribution pension is max 25% of the total value of the pension fund and is not related to final salary.

ANXIOUS

earlyevening wrote: »

Tax free lump sum in a defined contribution pension is max 25% of the total value of the pension fund and is not related to final salary.

That's not 100% correct. You have few different options on how to drawdown your benefits at retirement.

You can get a lump sum of a maximum of 1.5x your final salary and use the balance to purchase an annuity.

Or as is becoming more popular you can withdraw 25% of the fund value as a retirement lump sum (up to €200k tax free) then use the remaining 75% to invest in an AMRF/ARF.

Not giving you financial advice as I don't have your full details. But I wouldn't see the benefit in keeping it in your occupational pension scheme, I would look at transferring it to a life office product or retiring it now and going AMRF / ARF. As you will be in full control of it and it opens up a high selection of investment choices. Rather than the standard 6-7 funds in occupational pensions.

Let me know if you'd like anything clarified.

The J Stands for Jay

It will either be your highest salary on the last 5 years of the relevant employment, or the highest average of three or more consecutive years salaries in the last ten years of the relevant employment.

The important thing to do at this stage is hold on to all your p60s from any employments you have a pension fund from. It'll make things easier when you decide to cash in.

yqtwqxqm

ANXIOUS wrote: »

That's not 100% correct. You have few different options on how to drawdown your benefits at retirement.

You can get a lump sum of a maximum of 1.5x your final salary and use the balance to purchase an annuity.

Or as is becoming more popular you can withdraw 25% of the fund value as a retirement lump sum (up to €200k tax free) then use the remaining 75% to invest in an AMRF/ARF.

Not giving you financial advice as I don't have your full details. But I wouldn't see the benefit in keeping it in your occupational pension scheme, I would look at transferring it to a life office product or retiring it now and going AMRF / ARF. As you will be in full control of it and it opens up a high selection of investment choices. Rather than the standard 6-7 funds in occupational pensions.

Let me know if you'd like anything clarified.

Thanks I think ARF and withdrawing 25% sounds like the way to go. So I take out 25% tax free, but can I do that at age 50 or do I have to wait til a certain age?

Hani Kosti

ANXIOUS wrote: »

That's not 100% correct. You have few different options on how to drawdown your benefits at retirement.

You can get a lump sum of a maximum of 1.5x your final salary and use the balance to purchase an annuity.

Or as is becoming more popular you can withdraw 25% of the fund value as a retirement lump sum (up to €200k tax free) then use the remaining 75% to invest in an AMRF/ARF.

Not giving you financial advice as I don't have your full details. But I wouldn't see the benefit in keeping it in your occupational pension scheme, I would look at transferring it to a life office product or retiring it now and going AMRF / ARF. As you will be in full control of it and it opens up a high selection of investment choices. Rather than the standard 6-7 funds in occupational pensions.

Let me know if you'd like anything clarified.

Before confirming that someone can take 1.5 times salary TFLS should you not be asking for years of completed service? That only applies to 20+ years of completed service!!!

As to going ARF route, don't forget the mandatory distribution (and potential risk of a bomb out) and the fact you cannot access the funds until age 75 (unless you have a specified income)

Please speak to a financial advisor who can explain all pros and cons of each option!

ANXIOUS

Hani Kosti wrote: »

Before confirming that someone can take 1.5 times salary TFLS should you not be asking for years of completed service? That only applies to 20+ years of completed service!!!

As to going ARF route, don't forget the mandatory distribution (and potential risk of a bomb out) and the fact you cannot access the funds until age 75 (unless you have a specified income)

Please speak to a financial advisor who can explain all pros and cons of each option!

That's correct hence I said maximum is 1.5.

Mandatory distributions won't kick in for a number of years as he will be 50. You can access your ARF at any age subject tk tax. The AMRF is locked away till you are 75 or have a minimum income.

Agreed speak to a financial advisor.

ANXIOUS

yqtwqxqm wrote: »

Thanks I think ARF and withdrawing 25% sounds like the way to go. So I take out 25% tax free, but can I do that at age 50 or do I have to wait til a certain age?

You'd really need to speak to someone in great detail about this.

For example you would need to look into your entitlement to the state pension.

You can only take a maximum of €200k tax free. The next €63500 goes to an AMRF and balance to an Arf.

You can retire from the age of 50.

let me I wo if you've any other questions.

yqtwqxqm

Great. Thanks for the answers.
I will be going to an advisor alright, just wanted to get an idea so i know how to frame my questions.
You guys have been a great help. Really appreciated.

ANXIOUS

yqtwqxqm wrote: »

Great. Thanks for the answers.
I will be going to an advisor alright, just wanted to get an idea so i know how to frame my questions.
You guys have been a great help. Really appreciated.

Pm me if you need a recommendation for advise.