Cashing out a Pension

VidaLoca · 22-02-2017 11:45am #1

Hi,

My brother-in-law is emigrating in the next 6 months. He has worked for the last 17 years.

He has spoke to his pension provider on the possibility of cashing out his pension and has been informed he would need to be at least 50 or have an illness. He is 35 in good health

However, he was told that there are ways to do it. Some companies provide a service , for a huge percentage, to do this. I was also informed it is legal but frowned upon.

He wants to weigh up this option against keeping it or transferring it into another policy.

Does anyone know of companies that provide this service ? I'm hoping by asking here that I might get better quality companies then a random google search.

Thanks,

VL

Merowig · 22-02-2017 11:48am

How long was he in the pension scheme? You need to be a member of less than two years to cash out a scheme....
And there will be a tax liability for cashing out.

In my opinion he should leave the scheme where it is.

22-02-2017 11:51am

If it's a PRSA it can't be accessed unless there's retirement due to ill health.
If it's an OPS which it probably is he can more than likely get his contributions back out but of course there will be a tax implications.

Might not be worth doing at all.

Merowig · 22-02-2017 11:55am

In regards to an occupational Pension scheme: He would lose the employer contributions most likely. As far as I know if you are a member for more than two years you lose your ability to cash money out.

Henry Ford III · 22-02-2017 1:08pm

Merowig wrote: »

In regards to an occupational Pension scheme: He would lose the employer contributions most likely. As far as I know if you are a member for more than two years you lose your ability to cash money out.

That would be at the employers discretion.

If he's 35 and has 2+ years scheme service, the only way out before early retirement at age 50 is serious ill health.

The Revenue are particularly strict on their interpretation of this too.

There is no "high cost" way out. That just doesn't exist.

3DataModem · 22-02-2017 4:19pm

You could borrow against it, if you wanted to do something really really foolish.

VidaLoca · 22-02-2017 7:56pm

3DataModem wrote: »

You could borrow against it, if you wanted to do something really really foolish.

Who provides this kind of loan do you know ?

Rackstar · 22-02-2017 8:18pm

Why not just leave it for retirement? He'll need something to retire on.

TheQuietFella · 22-02-2017 8:22pm

I'll be cashing mine in shortly! Government levy of over €400 deducted!
Why would you bother saving for retirement? It's just another pocket for the
thieving bas***** to pick!

Merowig · 22-02-2017 11:05pm

Even with the now abolished levy a pension vehicle is the best way to secure your retirement.

Nermal · 23-02-2017 9:52am

Why not just transfer it to wherever he's emigrating to?

Looks up QROPS. It is used sometimes to transfer to a shady jurisdiction and 'cash out', but it would be perfectly legitimate in this instance.

cooperguy · 23-02-2017 10:55pm

TheQuietFella wrote: »

I'll be cashing mine in shortly! Government levy of over €400 deducted!
Why would you bother saving for retirement? It's just another pocket for the
thieving bas***** to pick!

Because of the massive tax incentive. Even with the pension levy it is by far the best way to save.

The J Stands for Jay · 25-02-2017 8:58am

Nermal wrote: »

Why not just transfer it to wherever he's emigrating to?

Looks up QROPS. It is used sometimes to transfer to a shady jurisdiction and 'cash out', but it would be perfectly legitimate in this instance.

QROPS is only for transferring a UK pension out of the UK.

JustAThought · 25-02-2017 9:30am

Tell him not to do it. Disaster idea as all have said here - and 17 years of pension will continue to accrue & build a future for him whilse he is starting his new life. I know someone who wangled this & they got a pittance back, that then affected their tax liability for the year & they were twice crucified with taxes on their work - and their partners benefits & tax credits were also affected, long dark story . The absolute gift of a 17 year pension should not be touched - it is a hallowed shrine that should be protected - the admin costs, penalties from the policy holder, insurance levys , government clawback & employer cintribution clawbacks will render it a pitiful exercise, and ine he will sorely regret in years ahead.

If he is that stuck tell him to open a CU account & borrow a bit to tide him over - he will get another job in his new country & the short term belt tightening will be worth it in the long run. Cash nothing in as long term valuable as this - or with the current changes in pension legislation will he really want to be working untilhe is 68 because he will be peniless otherwise? Imagine it, going to work in the DART at age 70, with your sandwiches packed into your zimmerframe.

Keep the pension. It is his real escape plan & dream ticket for when he is 50 or 60. Not now when he can still borrow, work & earn. Who wants to give the government 17 years of back subsidies & be taxed on your work three times?

5.11 Tactical · 25-02-2017 8:59pm

Thats all well and fine, but most pension schemes have collasped in the last few years, I have a large amount from a previous job and cant access it. Also I never wanted to be in the pension scheme and had no choice. Pension schemes are a waste of time, better to invest in physical gold and silver !

coylemj · 26-02-2017 12:02am

VidaLoca wrote: »

However, he was told that there are ways to do it. Some companies provide a service , for a huge percentage, to do this. I was also informed it is legal but frowned upon.

There are frequently ads. on the back of the Irish Times offering this service to former employees of the Irish banks with preserved pension benefits. I have no idea how they propose to release part of the person's pension as a cash lump sum under Irish pensions regulations but I have read articles by financial journalists in the UK commenting on people providing this service over there. By all accounts, it's just about legal but inolves a savage amount of financial pillage - there's major commission for the service provider, it's very tax-inefficient and should be avoided at all costs.

SteM · 26-02-2017 12:08am

5.11 Tactical wrote: »

Thats all well and fine, but most pension schemes have collasped in the last few years, I have a large amount from a previous job and cant access it. Also I never wanted to be in the pension scheme and had no choice. Pension schemes are a waste of time, better to invest in physical gold and silver !

"Most pension schemes" have not collapsed in the last few years. What rubbish.

AndrewJRenko · 26-02-2017 1:05am

TheQuietFella wrote: »

I'll be cashing mine in shortly! Government levy of over €400 deducted!
Why would you bother saving for retirement? It's just another pocket for the
thieving bas***** to pick!

I presume you didn't object to the extensive tax relief that you got from the thieving bas**** on the way into the fund?

5.11 Tactical wrote: »

Thats all well and fine, but most pension schemes have collasped in the last few years, I have a large amount from a previous job and cant access it. Also I never wanted to be in the pension scheme and had no choice. Pension schemes are a waste of time, better to invest in physical gold and silver !

Collapsed? Average 10% returns on 3 years and 11% on 5 years;

https://www.rubiconic.ie/blog/2017/02/03/2017-off-to-a-rocky-start-for-irish-pension-funds/

bridster007 · 26-02-2017 12:04pm

3DataModem wrote: »

You could borrow against it, if you wanted to do something really really foolish.

By law a pension can't be used as collateral for borrowing.

The J Stands for Jay · 26-02-2017 12:48pm

bridster007 wrote: »

By law a pension can't be used as collateral for borrowing.

But the banks will still give you an interest only loan based on a written promise to pay them the lump sum from your pension.

coylemj · 26-02-2017 1:19pm

McGaggs wrote: »

But the banks will still give you an interest only loan based on a written promise to pay them the lump sum from your pension.

A 'written promise' that wouldn't be worth the paper it's written on.

The J Stands for Jay · 26-02-2017 1:46pm

coylemj wrote: »

A 'written promise' that wouldn't be worth the paper it's written on.

They've been doing it for years and they still do it. They reckon they can recover the debt once their customer gets their hands on the pension assets.

Hani Kosti · 26-02-2017 6:47pm

Nermal wrote:

Looks up QROPS. It is used sometimes to transfer to a shady jurisdiction and 'cash out', but it would be perfectly legitimate in this instance.

McGaggs wrote:

They've been doing it for years and they still do it. They reckon they can recover the debt once their customer gets their hands on the pension assets.

Under current Revenue legislation you cannot assign pension as a guarantee for a loan. No ifs or jiggly but(t)s

bridster007 · 26-02-2017 9:44pm

McGaggs wrote: »

They've been doing it for years and they still do it. They reckon they can recover the debt once their customer gets their hands on the pension assets.

That's not borrowing against a pension. It is an unsecured loan against the expected tax free lump sum to be received after pension is drawn down. Common within 1 or 2 mths before retirement in order to allow member maximise AVC contributions.
The TFLS is still paid direct to the member and it is up to them whether they want to pay back the bank loan. I can't see how the OP at 35 could get such loan

TheQuietFella · 26-02-2017 10:04pm

AndrewJRenko wrote: »

I presume you didn't object to the extensive tax relief that you got from the thieving bas**** on the way into the fund?

The bas***** didn't have the pension scheme guaranteed when the company closed and they were taken to the European Courts where they lost their case.
And still they dragged it out to the very last. That's Fine Gael & The Labour Party for you!
What ever I gained from tax relief have been given taken back in multiples!

It's all just another scam waiting to collapse!

AndrewJRenko · 26-02-2017 10:09pm

TheQuietFella wrote: »

The bas***** didn't have the pension scheme guaranteed when the company closed and they were taken to the European Courts where they lost their case.
And still they dragged it out to the very last. That's Fine Gael & The Labour Party for you!
What ever I gained from tax relief have been given taken back in multiples!

It's all just another scam waiting to collapse!

I've no idea what this means. Are you saying you lost money because the pension scheme collapsed? If so, please provide more details. Unless it was a Defined Benefits scheme (which is fairly unusual these days), schemes don't collapse. Any losses incurred are as a result of investment strategies.

Pensions in general, are far from being a scam. The only scam is the extensive tax relief provided to the more well-heeled members of society, but that's for another discussion really.

Merowig · 26-02-2017 10:47pm

I like my tax relief and they are not a scam.
Some defined benefit schemes were/are in trouble because they are underfunded by the companies. A defined contribution scheme is different - it is in a trust and even if the company closes down it doesn't impact your value in the fund.
You should read up the difference between a defined benefit scheme and a defined contribution scheme....
That most pension schemes collapsed is simply not true!!!!

P.S. saving in gold/silver for a pension is not a good idea at all - metals don't pay out dividends and you won't have the tax incentives. I don't mind having some shiny metals as part of a general diversification strategy of ones wealth - but that means having a maxed out pension fund, a savings account, one or more apartements/houses, shares and then you can add as well some gold to this mix.
For a pension one should always save via a low cost pension wrapper in order to avail of the tax incentives. It is free money from the government especially when you are at the higher rate.

Cashing out a Pension

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