Pension Statement

newhouse87

Hi, Just studying my pension statement for first-time after a colleague was asking me questions about it. Essentially i have figue I'm entitled to p.a when i retire on it, i take it that does not include the state pension i will also receive? That figure is not taxed either? Finally are my avcs tax free up to 200k and i only pay 20% from 200-500k? Thanks for any info.

Geuze

Are you a member of an occupational pension scheme?

If so, is it a DB or DC scheme?

newhouse87

https://www.boards.ie/discussion/comment/121709156#Comment_121709156

Its a care scheme with a multinational, was db for 2 years but company changed it to this care thing. So think its dc now. It gives p.a amount i can expect at retirement but would this normally include state pension in that amount, think the figure given has 1.5times state pension minused from gross figure in line above?.

Also putting in alot into avcs so hoping its 20% tax from 200-500k so lump sum i could take would be 440k from 500k in pot if that was the situation.

Henry Ford III

Who are the scheme advisors? Surely they'd be in a better position to advise?

newhouse87

You would think that. With regards avcs. Can I take 200 tax free and 20% tax on next 300k? Or does my actual pension implicate my avcs?

newhouse87

Just a followup, on avcs is it you can only take 25% of the fund tax free which totally changes my perspective if true. I was under impression from reading revenues site up to 200k tax free and 20% tax up to 500k but they are the total figures so i would need essentially 800k in avs to take 200k tax free? Really is not well laid out the guidelines anywhere. Also didn't know until an hour ago i will pay income tax on my occupational pension.

Jim2007

The only EEA country I'm aware that give you a free pass on income taxes in retirement is Portugal and even there it is limited to 10 years.

coylemj

Also didn't know until an hour ago i will pay income tax on my occupational pension.

And USC.

Happyhouse22

https://www.boards.ie/discussion/comment/121714015#Comment_121714015

What are you expecting total pension pot to be? You can’t really think of AVCs separately, the amount you can take tax free (25%) will be calculated from both.

will pay income tax but unless the numbers are very big this probably won’t be that much

newhouse87

Does anybody know way avcs lump sums are taxed if its only lumpsum im taking from my pensions. Seeing conflicting info.

The J Stands for Jay

https://www.boards.ie/discussion/comment/121716496#Comment_121716496

AVC lump sum is taxed in exactly the same manner as any pension lump sum.

Your CARE scheme is DB. Whether or not the figure shown is inclusive of state pension will depend on your particular scheme's rules. It will be explained in the statement.

BTW, state pension is taxable.

newhouse87

https://www.boards.ie/discussion/comment/121717569#Comment_121717569

Is it 200k tax free then20% to 500k or is it max 25% of avc fund is tax free?

The J Stands for Jay

https://www.boards.ie/discussion/comment/121719155#Comment_121719155

First €200k of all pension lump sums is tax free, next €300 is taxed at 20%, anything over that is taxed as income. That includes lump sums taken from AVCs.

The AVC pension lump sum is calculated on the same basis as the main scheme. That can be either based on your salary and length of service, or can be 25% of the fund value.

newhouse87

https://www.boards.ie/discussion/comment/121719272#Comment_121719272

So to take 200k tax free from my avcs I'd need to have 800k in the fund? Say Im in situation of 160k salary, I could take 200k from my avcs as it would be 1.5 times salary then rest of avcs say 300k would be taxed at 20%

The J Stands for Jay

https://www.boards.ie/discussion/comment/121719543#Comment_121719543

No.

If you have worked at least 20 years with this employer and you are leaving at the retirement age of the scheme (which can be any age between 60 and 70 and is set by the trustees), then you could take 150% of salary across the main scheme and AVC. The lump sum would be €240k, with €8k tax payable. That lump sum would be taken from either the main scheme or AVC, or a combination of the two.

The rest of your AVCs (if any) could be used to buy an annuity, buy an ARF or tax a lump sum charged as income under PAYE.

newhouse87

https://www.boards.ie/discussion/comment/121719574#Comment_121719574

Sorry I'm a bit slow this morning. Would the remainder of the avcs not be taxed at 20% up to 500k. That was my hope, if not ill scale back the avcs.

poppers

https://www.boards.ie/discussion/comment/121719606#Comment_121719606

Not trying to be smart but if your talking about half a million quid here. Would you not pay a qualified finical/tax advisor few hundred quid and get all the correct answers to you question instead of relying on some anonymous advise on a internet forum.

newhouse87

https://www.boards.ie/discussion/comment/121719628#Comment_121719628

If a person here knows why not ask? It's a discussion forum.

The J Stands for Jay

https://www.boards.ie/discussion/comment/121719606#Comment_121719606

Your main scheme seems to be a DB scheme. It's usually poor value to take a lump sum from a DB scheme, so the usual recommendation is to take the lump sum from the AVC. In that case, and assuming your lump sum is €240k, your AVC could be 200k@0% and 40k@20%.

You need to get proper advice from someone who has all the details of your finances and pension.

newhouse87

https://www.boards.ie/discussion/comment/121719636#Comment_121719636

Yeah cheers for info. I won't be taking any lump sum from pension just avcs. So anything after I take my max lump sum is taxed at the highest rate? Oh I get it I can't take rest as cash I have to take arf or similar.

poppers

https://www.boards.ie/discussion/comment/121719635#Comment_121719635

i'm sure some one in your local pub knows aswell but would you take that as gospel,

here is a link to revenue they have the all the answers

https://www.revenue.ie/en/jobs-and-pensions/pension/private/retirement-lump-sums.aspx#:~:text=Taxation%20of%20pensions&text=You%20can%20receive%20a%20tax,marginal%20tax%20rate%20(40%25).

newhouse87

The revenue site is not as clear as you think, hence why I'm asking here.

The J Stands for Jay

https://www.boards.ie/discussion/comment/121719635#Comment_121719635

Because you don't seem to be grasping the basics, and may make a costly mistake because you're taking less care with €500k - €1m in pension funds than you would when buying a €40k car.

The J Stands for Jay

https://www.boards.ie/discussion/comment/121719644#Comment_121719644

You can take the rest of it as a lump sum, but it would be expensive from a tax point of view. Using an ARF and taking tax efficient withdrawals over time would seem more prudent.

The J Stands for Jay

https://www.boards.ie/discussion/comment/121719669#Comment_121719669

Revenue pensions manual is quite clear. Chapter 7 on lump sums and chapter 27 on taxation if lump sums.

https://www.revenue.ie/en/tax-professionals/tdm/pensions/index.aspx

poppers

https://www.boards.ie/discussion/comment/121719669#Comment_121719669

From what i was told when i set up my pension you can take max of 25% lump sum of the final pot tax free. (up to a limit of 200K, from 200-500 is taxed at 20% anything above this is taxed at marginal rate.) the other 75% is used to fund your annual pension payments.

Dont take this as gospel and as Jay says above go get proper finical advice.

Jim2007

https://www.boards.ie/discussion/comment/121719669#Comment_121719669

The Revenue site is crystal clear on this and is one of the primary source for the application of the tax laws in the country. Your problem is the you lack the basic knowledge of pensions and taxation to be able to understand it in it's entirety. Now from what you have said it looks like you may have a significant amount at stake here and you'd be very well advised to seek comprehensive professional advice on your retirement plans.

There are two problems when it comes to individuals make pension decisions - the first is the consequence of their decision may not be known for several years and the second is that it very unlikely the decision can be reversed when it is discovered.

newhouse87

It was the bit about the level of tax after my lump sum I was not getting. I get it now that any money after my lump sum will be taxed at my marginal rate. I have talked to lot lads at work and they also thought any money left after lump sum over 200k was taxed at 20% up to 500k and now I know that is not the case.

newhouse87

https://www.boards.ie/discussion/comment/121719686#Comment_121719686

Well since its my marginal rate that would not make sense to take it. My mistake was thinking it was 20% on my avcs pot after my lump sum up to 500k.

newhouse87

Alex retired on 31 January 2023 and is paid a retirement lump sum of €800,000. This

is the first such lump sum they have received. They are chargeable to tax as follows:

 the first €200,000 is exempt,

 the next €300,000 is taxed under Case IV of Schedule D at the standard rate

in force in 2023 (20% - tax due on this portion of the lump sum = €60,000),

and

 the balance, i.e. €300,000, is taxed under Schedule E at their marginal rate in

2023 – assuming their marginal rate was the higher rate of 40%, the tax due

on this portion of the lump sum is €120,000.

 Total tax due on the lump sum: €60,000 + €120,000 = €180,000.

If Alex receives any future retirement lump sum, it will be subject to tax under

Schedule E at their marginal rate in the year it is paid.

Above from revenue, I was right originally it seems. If I have 500k in my avcs pot, 200k taxfree and next 300k taxed at 20%. No need to scale back contributions so as 20% better then paying 40% If I didn't contribute. Them links are crystal clear, I had not seen them before. No need for financial adviser after all.

Danny Drier

https://www.boards.ie/discussion/comment/121719606#Comment_121719606

Slow is right tbf