Case Study 1 – 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. 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.
Case Study 2 – 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 from 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 invested into an ARF, which was set up via ARF Ireland.
- The ARF obligatory income requirement of 4% of the ARF value (€19,200) 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 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 so that it could be reasonably be expected to provide him with income up to age 90.
See our page with the explanation as to what happens when you access a pension