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Retirement 2nd Life – Pension Retirement Options

When you arrive at retirement to embark on your second life you will now have access to the private pension pot you were building throughout your working life. Personal Pensions, Company Pensions, Personal Retirement Savings Accounts and Personal Retirement Bonds all form part of that pot.

Did you know that Personal Retirement Savings Accounts allow for a phased retirement as they can be drawn down one by one enabling you to control your retirement income, income tax, lump sums and death benefits?

Taking advice when deciding on your options at retirement is wise, as the decisions you make will have a bearing on your own financial security and that of your dependents. Contact us now.

  • When an individual retires, they ‘claim their benefits’ from the private pension/s accumulated over the course of their working life.
  • A number of options will be presented at this point, including taking a tax-free lump sum of up to €200,000 with the remainder transferring to an Approved Retirement Fund or used to buy an Annuity or a mixture of both.
  • Taking a Trivial Pension may also be an option for individuals, who after taking their tax-free lump sum have a small residual balance.

APPROVED RETIREMENT FUND

  • An Approved Retirement Fund is a post-retirement investment product into which your benefits can be transferred.
  • An Approved Retirement Fund gives you flexibility in terms of how you invest your retirement proceeds.
  • It allows you to retain control and gives you the opportunity to remain invested in the market with access to a range of investment funds.
  • You will have the freedom to withdraw some of your retirement value when you need to, with a minimum annual withdrawal of 4%.
  • Making regular withdrawals may reduce the value of your fund. It is possible that your fund could run out before you die.
  • When you die the fund value remaining at that date passes to your estate subject to income tax and / or inheritance tax depending on who inherits the benefits.

ANNUITY

  • An annuity is a post-retirement financial product which will pay you a regular fixed income.
  • Annuities give you a guaranteed income without the need for investment management.
  • They are available as either single life annuities or joint life annuities.
  • A single life annuity will pay you regular income until you die. A joint life annuity will continue to pay income to your spouse after your demise.
  • Although annuities generate a regular form of income, they aren’t necessarily the right choice for everyone and annuity rates were much higher in the past.

TRIVIAL PENSION

  • A trivial pension is a taxable lump sum which can be taken from a pension at retirement, where the remaining balance after taking the tax-free cash amount is small.
  • There are two options when it comes to taking a trivial pension. The tax payable on the remaining balance will depend on which option is chosen.

PERSONAL RETIREMENT SAVINGS ACCOUNTS

  • Personal Retirement Savings Accounts allow for a phased retirement, as if you have more than one contract in place, each can be drawn down at different times enabling you to control your retirement income and lump sums.
  • The Golden Era for PRSA’s is between the ages of 60 and 75 as you can both access and fund at the same time
  • In the event of death before drawing down benefits, the full value goes tax-free to the deceased’s Estate. Capital Acquisitions Tax may apply depending on who the beneficiary is.