Pension lump sum

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Sunnygirl69

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If one were to sign a 'pension lump sum waiver form' when being made redundant, to maximise their tax allowance. How does this affect the options on the AVC part of their pension?
ie Does it stop one from receiving lump sum from AVCs?, I know it stops the option of lump sum on ordinary pension.
 
The main scheme and the AVC are linked. So if you have waived your right (using SCSB) then the waiver applies to any lump sum from the two linked schemes.
 
Sunnygirl69 said:
If one were to sign a 'pension lump sum waiver form' when being made redundant, to maximise their tax allowance. How does this affect the options on the AVC part of their pension?
ie Does it stop one from receiving lump sum from AVCs?, I know it stops the option of lump sum on ordinary pension.
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This is a topical query, and something which many people fail to understand the full long termimpacts. Most people in redundancy situations, only see an extra X’000 €, for the waive pension lump sum option, and take that option, without regard for the long term impacts.
In the majority of cases, bar some circumstantial and age related exceptions, it is usually, NOT a good idea to opt, to go for the Pension Lump Sum waiver option, even allowing for the additional tax free amount on Termination. The short term tax free gain, almost always dwarfs,the benefit of keeping the tax free lump sum for Later on.

This option denies, up to 25% of a tax free lump sum of the pension & avc total, but its somewhat understandable, that particularly under 40 year olds, take the option, get the extra tax free amount, possibly unwittingly disregarding the long term impacts. That age cohort, can sometimes have a different viewpoint, as they may see retirement, as too far away, over the distant horizon.

Its a big impacting decision where paid- professional independant advice should be sought, to be as well informed, as possible, and while most employers give the Employee access to discuss the options with the Employer Pension company, with the company pension scheme operator, thats not the best fit, for giving independant advice.
 
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does the waiver transfer to a PRSA with another provider, say Standard Life or Aviva?
 
JKForde said:
does the waiver transfer to a PRSA with another provider, say Standard Life or Aviva?
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No. If you transfer your fund from an Occupational Pension Scheme to a PRSA, regardless of PRSA provider, the waiver does not apply to the PRSA and you can take 25% of the fund as a lump sum from the PRSA at retirement.
 
LDFerguson said:
No. If you transfer your fund from an Occupational Pension Scheme to a PRSA, regardless of PRSA provider, the waiver does not apply to the PRSA and you can take 25% of the fund as a lump sum from the PRSA at retirement.
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thanks a lot for the fast reply and confirmation. and am I correct about the recent revenue guidance (not legislated) that early retirement is now 60, not 50, and retirement is now interpreted as final retirement and not just from last employment.
 
interesting, paragraph 13.2 in that eBrief (based on Finance Act 2021 amendments) is fairly explicit:
"where details are provided for transfers between schemes, details of any irrevocable waiver of the right to a lump sum must be included."
 
JKForde said:
thanks a lot for the fast reply and confirmation. and am I correct about the recent revenue guidance (not legislated) that early retirement is now 60, not 50, and retirement is now interpreted as final retirement and not just from last employment.
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If you want to retire a PRSA before age 60, you must be retiring from all employments and not just the one where the PRSA contributions were made. From 60 onwards, you can retire a PRSA regardless of whether or not you're still in employment.
 
LDFerguson said:
If you want to retire a PRSA before age 60, you must be retiring from all employments and not just the one where the PRSA contributions were made. From 60 onwards, you can retire a PRSA regardless of whether or not you're still in employment.
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thanks again! so how is it policed? i mean, if a person writes and signs a declaration that they themselves wrote in a Word doc that they're permanently retiring, get their lump sum, and then go back into employment. I mean, it seems this is just ill thought out and unpoliceable.
 
JimmyB99 said:
Hi Liam,

What precisely does the relevant section of this e-brief mean in this regard?

Revenue eBrief No. 149/22

Revenue Pensions Manual - updates to Chapters 7, 10, 12, 13, 16 and 24
www.revenue.ie www.revenue.ie
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JKForde said:
interesting, paragraph 13.2 in that eBrief (based on Finance Act 2021 amendments) is fairly explicit:
"where details are provided for transfers between schemes, details of any irrevocable waiver of the right to a lump sum must be included."
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In paragraph 13.2, in the first paragraph, Revenue differentiate between an exempt approved scheme, an approved buy-out bond and a Personal Retirement Savings Account (PRSA). My reading of subsequent paragraphs is that Revenue then refer only to "schemes".

But my reading could be wrong. Looking at a 2023 PRSA retirement claim we processed recently the PRSA claim form doesn't have any questions about whether or not the lump sum sum had been waived. But that could just be that the provider needs to update their forms.
 
"The administrator of the scheme making the transfer must be satisfied that the receiving scheme is an exempt approved scheme and must advise the receiving scheme of the benefits attaching to the payment.
Details should be given of service, salary, lump sum benefit entitlement or if an employee has irrevocably given up the right to receive a lump sum from such a scheme."

 the fact that the 'receiving scheme' hasn't updated their application form doesn't apply it seems, the obligation is on the administrator of the 'sender' scheme to fully disclose the specific terms of the transfer. curious though that the wording is "should" and not "must".
 
JKForde said:
"The administrator of the scheme making the transfer must be satisfied that the receiving scheme is an exempt approved scheme and must advise the receiving scheme of the benefits attaching to the payment.
Details should be given of service, salary, lump sum benefit entitlement or if an employee has irrevocably given up the right to receive a lump sum from such a scheme."

 the fact that the 'receiving scheme' hasn't updated their application form doesn't apply it seems, the obligation is on the administrator of the 'sender' scheme to fully disclose the specific terms of the transfer. curious though that the wording is "should" and not "must".
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Good point. So the sender tells the PRSA recipient that the lump sum was waived. Notable that the Revenue manual doesn't explicitly say what the recipient must do with that information. I suppose it's one for the PRSA providers to tease out the details with Revenue.
 
Hi @LDFerguson

Is that not a bit passive from you?!

Sorry for being critical but I'd have thought that the adviser would have done his own teasing out! Like, whether a TFLS is available is surely significant in terms of the merits of transferring out or not!
 
LDFerguson said:
Notable that the Revenue manual doesn't explicitly say what the recipient must do with that information.
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haha, but I suppose Revenue expects the receiving administrator to explicitly record in the new PRSA contract that a lump sum is not allowed due to a 'transferred' waiver. but if the sending administrator is willing to overlook this obligation, then that's their legal risk, if there is any. I guess it hinges on the legal 'handshake'.. "I've informed you, you've acknowledged", so legal obligation transfers to the new administrator.
 
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JimmyB99 said:
Hi @LDFerguson

Is that not a bit passive from you?!

Sorry for being critical but I'd have thought that the adviser would have done his own teasing out! Like, whether a TFLS is available is surely significant in terms of the merits of transferring out or not!
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If one of my clients is in this situation, I'll put in the time and effort to get confirmation from Revenue. So far this year, I haven't been asked to process a transfer to a PRSA by someone who waived the lump sum right in the transferring scheme.
 
LDFerguson said:
If you want to retire a PRSA before age 60, you must be retiring from all employments and not just the one where the PRSA contributions were made. From 60 onwards, you can retire a PRSA regardless of whether or not you're still in employment.
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is there revenue guidance on this?
 
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