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Define benefit pension questions

  • 06-02-2018 1:02am
    #1
    Fol20
    Registered Users, Registered Users 2 Posts: 3,625 ✭✭✭


    Hey guys. I was just wondering with a define pension are you able to retire at 50 or does it have to be at age 68 to receive their pension. Likewise if you wanted to, could you take your entire pension as a lump sum. I know some of it would be taxable but just can’t find this info anywhere with this type of pension


Comments

  • #2
    notharrypotter
    Closed Accounts Posts: 1,112 ✭✭✭notharrypotter


    Fol20 wrote: »
    Hey guys. I was just wondering with a define pension are you able to retire at 50 or does it have to be at age 68 to receive their pension. Likewise if you wanted to, could you take your entire pension as a lump sum. I know some of it would be taxable but just can’t find this info anywhere with this type of pension

    Defined benefit?
    What does your statement of benefits say?


  • #3
    Peregrinus
    Registered Users, Registered Users 2 Posts: 26,556 ✭✭✭✭Peregrinus


    If you're in a defined benefit pension scheme, there'll almost certain be a scheme booklet which sets out what your retirement options are.

    However, assuming its an approved scheme for Irish tax purposes, then the retirement options it can provide are limited by what Irish tax and pension law will allow. Under these limits, retirement at age 50 is normally only possible in cases of incapacity, but retirement from age 60 may be possible without incapacity. The maximum lump sem you can get will be capped at 3/80ths of your final salary for each year of your service, to a maximum of 40 years.


  • #4
    Grassey
    Registered Users, Registered Users 2 Posts: 2,393 ✭✭✭Grassey


    Anyone can retire from age 50, it's not limited to incapacity.

    The bigger concern would be how solvent the DB scheme is, if it's underfunded/insolvent then it is unlikely that you'd be allowed by the Trustees to mature your benefits early.

    As mentioned, check your last statement. It should detail when your NRA is (may not be 68), and what your entitlements are projected at for retirement at NRA.


  • #5
    notharrypotter
    Closed Accounts Posts: 1,112 ✭✭✭notharrypotter


    Grassey wrote: »
    Anyone can retire from age 50, it's not limited to incapacity.

    The bigger concern would be how solvent the DB scheme is, if it's underfunded/insolvent then it is unlikely that you'd be allowed by the Trustees to mature your benefits early.

    As mentioned, check your last statement. It should detail when your NRA is (may not be 68), and what your entitlements are projected at for retirement at NRA.

    You may be allowed to go early but it may be on a cost neutral basis.

    This can mean that the accrued benefits you have based on the notional retirement age will not be available and a lesser amount is what you will be offered.

    So check the rules of your scheme.

    Also the trustees should have the final say.


  • #6
    phormium
    Registered Users, Registered Users 2 Posts: 3,345 ✭✭✭phormium


    Yes in theory you can retire at 50 but no guarantee you are going to get your pension at that age.

    I would love to get my hands on my defined benefit pension early but the company are not allowing that, at the moment it's 65, I realise if I got it early it would be a reduced amount but even that is not an option.

    It's practically fully funded too, just slightly short at the moment and company is planning on reaching full funding this year or so we're told anyway!


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  • #7
    Henry Ford III
    Moderators, Business & Finance Moderators Posts: 17,725 Mod ✭✭✭✭Henry Ford III


    The cost of early retirement can be significant, so many employers just won't allow it.

    It is possible (but in most cases inadvisable) to take a t.v. out but it'll be poor value in relation to the value of the future benefits.

    The other big issue is scheme solvency. They can promise you the sun moon and stars but if the funds aren't there to pay for that you'll be looking at a wind up with reduced benefits. Many examples of that have happened.


  • #8
    coylemj
    Registered Users, Registered Users 2 Posts: 25,479 ✭✭✭✭coylemj


    Revenue will allow the scheme to pay you the pension from age 50 (doesn't require incapacity or serious illness) but if the scheme is underfunded, it's unlikely the trustees will allow this, even with an actuarial penalty for drawing the pension early.

    The reason is that letting someone go early onto the pension causes an immediate hit to the fund's solvency because the acid test involves them purchasing an annuity to fund your pension and with the current low interest rates, that would cost a packet and leave less money for the serving and deferred members. So for the sake of the numbers, it makes more sense for them to string you out until you reach the 'normal retirement age' which varies by scheme.


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