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.
The solution
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 Paul's 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.
An Approved Retirement Fund (ARF)
Jack chose to invest in an Approved Retirement Fund (ARF). Here’s how it worked:
Lump Sum & Investment
Jack received €250,000 as a lump sum. (The first €200,000 was tax-free, and the remaining €50,000 was taxed at 20%). The remaining €750,000 was invested in an ARF, allowing Jack to manage his funds and draw income as needed.
Annual Income
Based on the funds that Jack has chosen, he has decided on 4% drawdown for the moment. Jack now receives a gross annual income of €30,000, with flexibility to adjust as his needs change. This income is subject to Income tax, PRSI, and USC.