Accessing Your Pension
When you access either a Personal Pension or Company / Occupational Pension or PRSA Pension, you will access the Pension under 2 headings:
- Tax Free Cash Lump Sum and
- The balance of the Pension is taken in the form of an Annuity or Approved (Minimum) Retirement Fund also known as an ARF & AMRF
The tax free lump sum entitlement can be calculated in one of 2 ways (depending on the type of pension you are accessing). These are:
- A Tax Free Lump Sum equal to 25% of the value of the Pension Fund or in some cases,
- A Tax Free Lump Sum no more than 1.5 times your pre retirement income.
In both cases the tax free lump sum is capped at €200,000
In most cases you will be required to use the residual balance of the pension to either:
• Purchase an Annuity or
• Invest in an ARF / AMRF (Approved Retirement Fund / Approved Minimum Retirement Fund)
You may want to consider reading information on what is an Annuity?
For a full explanation on how to access your pension click here to email Joanne and obtain our Pension Access Explained Guide.
Accessing a Pension Testimonials
“I had a number of pensions that I was ready to drawdown but I was very confused as to how I should do this, and what I needed to do. ARF Ireland took control of the process for me and dealt with my existing pension providers to get me my tax free lump sum from the pension, and also set up my ARF & AMRF.”
– DAVID, RETIRED COMPANY DIRECTOR (I.T.)
“As a conservative investor, ARF Ireland created an ARF investment portfolio for me that gives the potential for reasonable growth during periods of financial market highs but also protects me from periods of market turmoil…they have also always fulfilled their initial promise to me to review my ARF with me on a regular basis.”
– CONOR, RETIRED GP
Case Study 1 – Can I access my Company Pension at age 62?
Male, Company Director aged 62, Married
Pat from Cork
Pat was a Company Director age 62 with a Company Pension Fund of €640,000. He wanted to access his pension because he was looking to reduce his involvement in his business. His daughter was taking more day to day responsibility and Pat would eventually transfer his shareholding in the business to her. He was unsure what his pension options were and also if he could access his pension whilst still being employed and involved in his business.
Once we reviewed Pat’s circumstances, we took the following actions:
- Yes, he could access his Pension without having to retire fromYes, he could access his Pension without having to retire from his business. his business.
- He was able to access 25% of his pension as a tax-free lump sum = €160,000 (€640,000 x 25%).
- The remainder of his pension, €480,000, was structured as €63,500 AMRF and €416,500 to an ARF, which was set up via ARF Ireland.
- The ARF obligatory income requirement of 4% of the ARF value (€16,660) was acceptable to Pat as he was going to be taking circa €20,000 less income from the business anyway as a result of his reduced involvement.
- The ARF and AMRF would also pass to Pat’s wife in the event of Pat passing away which was very important to Pat and his wife.
- Pat was intent on reducing his involvement completely in the business by age 65 and would also then stop taking an income from the business. We were able to show Pat the recommended sustainable level of income he should take from his ARF / AMRF so that it could be reasonably be expected to provide him with income up to age 90.
Case Study 2 – Annuity or ARF?
Retiring GP age 61, Married
Paul from Dublin
Paul (GP) aged 61 was retiring from his medical practice after 30 years. He had a GMS Pension valued at €625,000 and 2 private pensions valued at €95,000. He had received his retirement options from the GMS Pension Scheme Trustees but was confused as to whether he should take an Annuity or ARF and also what effect decisions he might make now would have when he subsequently came to accessing his 2 private pensions.
Once we reviewed Paul’s circumstances, we took the following actions:
- We decided to access the GMS Pension now to benefit from the 25% tax free cash lump sum of €156,250 (€625,000 x 25%).
- The balance of the GMS Pension of €468,750 was placed into an ARF/AMRF. The annuity option was explored but the inheritance restrictions associated with the annuity may have had knock on negative consequences for Pauls spouse.
- A conservative ARF investment profile was recommended for Paul.
- The 2 private pensions were not accessed at this time leaving them free to be accessed later. This will allow the 2 private pensions to grow further so the 25% lump sums should be, when accessed, a higher lump sum amount in a few years time.
Click here for an explanation on detailed Annuity or ARF considerations and the pros and cons of Annuity vs ARF and what may be right for you.