Pension lump sum

Oisin19 said:
is there revenue guidance on this?
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Section 787k, 2B of the TCA “in the case of an individual being an employee, the payment to the individual of an annuity or other sums pr the making available of assets of the PRSA to the individual commencing on retirement at age 50 or over”.

The legislation doesn’t specify that the member only has to be retired from the employment to which the PRSA relates to, its says “retirement at age 50”. So it’s interpreted as having to be fully retired from all employment.
 

Section 24.5 says:
Benefits may be taken when the individual reaches age 60.

Footnote: Benefits may be taken at any age, if an individual is permanently incapacitated through infirmity from carrying on their occupation (see Chapter 9). In addition, retirement from age 50 may be allowed in the case of employed contributors and of individuals whose occupation is one from which people customarily retire before age 60.
 
JKForde said:

Section 24.5 says:
Benefits may be taken when the individual reaches age 60.

Footnote: Benefits may be taken at any age, if an individual is permanently incapacitated through infirmity from carrying on their occupation (see Chapter 9). In addition, retirement from age 50 may be allowed in the case of employed contributors and of individuals whose occupation is one from which people customarily retire before age 60.
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Yea, thats correct for serious ill health claims and certains specified occupations ( there is a revenue list of these occupations).

A direct response from revenue on their interpretation of section 787k of the TCA for all other forms of early retirement stated “The legislation is not about an individual retiring from an employment to which the PRSA relates but about general retirement being the cessation of work (both employment or self employment”.

Above comments are correct in that TFC can be paid from a PRSA which has resulted from a transfer of an OPS scheme on which the access to TFC was waived. However, while the provider / PRSA administrator can pay out the TFC in these instances there have been cases where Revenue have gone back to individuals directly where they have become aware of the payment of TFC and they have connected this to an earlier redundancy payment which included the uplift for the waiver of TFC. So this in my opinion is in revenues hands. They will have data on:

1 - the redundancy payment
2 - the OPS tv to the PRSA (as these have to be reported)
3 - the maturity of the PRSA, in particular for larger cases where tax may fall due

So revenue would appear to have the capability to join up the dots where they want to. Whats not known is how often they do this or what level they look into this. I’d always say its possible to do but there is never a guarantee that revenue will not come back looking to review the tax paid on the redundancy payment at some point in the future.
 
Thanks Smoneen,

Can you just confirm that I've got this right please?

Someone with >15 years can transfer to a PRSA and can receive a TFLS from the PRSA provider even if they have previously waived their TFLS? And the Revenue may subsequently come looking for unpaid tax?
 
Yes, thats it.

If the OPS is not winding up and the TV is greater than €10k you will also need to pay to complete a COBC to transfer the OPS to the PRSA.
 
Thanks Smoneen,

That's very interesting.

How much are COBC's going for these days?! Is there are merit in them if, say, you are transferring from a DC OPS to a PRSA?
 
JK - You could well be right but honest to Allah, hard to see the value if moving from one DC to another. Let's face it, if your adviser can't explain the significance in the differential in charges, he really shouldn't be advising, right? What else is there to it?
 
only benefit is to expunge a OPS TFLS waiver and with 10+yrs potential growth, it may be worth it but not if Revenue decide to audit you down the road, I could do without that strain.

but really, the risk is taken on by the scheme administrators I guess, so they can be sued if they manage the OPS > PRSA transfer and willfully dismiss contemporary revenue guidance.
 
JKForde said:
I've heard €1500 plus VAT is typical
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One of the recent commission on pension recommendations was to get rid of the COBC requirement altogether. Gradually the recommendations are being implemented so if I was a betting man I'd bet on the COBC being killed off in 2023. If there was no urgency on the transfer, I'd be inclined to sit on it for a while to see if I can save €1,500 or so.
 
It would be interesting to see what @Marc makes of the advisability of transferring to a PRSA - where someone has previously waived the right to a TFLS. He usually has interesting angles on this sort of thing.
 
LDFerguson said:
One of the recent commission on pension recommendations was to get rid of the COBC requirement altogether. Gradually the recommendations are being implemented so if I was a betting man I'd bet on the COBC being killed off in 2023. If there was no urgency on the transfer, I'd be inclined to sit on it for a while to see if I can save €1,500 or so.
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that's a nugget! am talking to an advisor about it at the mo so will mention this to them, pls let us know if you hear anything more definite!
 
I was made redundant last year and this came up. The pension provider (paid to give us advice) was extremely reluctant to discuss it. They were insistent that the waiver went to the new pension provider (needed on application or not) and what they did with it after that was their problem. Didn't apply to me so not sure if people went through with it. Everyone knows the gap is there and I doubt revenue would do anything at this stage rather than close it down going forward.
 
I think that's the correct interpretation.. onus is on the OPS admin to inform the PRSA provider of the waiver, gets an official acknowledgement and that's it, up to the new PRSA provider to incorporate the waiver 'rider' into the PRSA contract or not.
 
T
Smoneen said:
Above comments are correct in that TFC can be paid from a PRSA which has resulted from a transfer of an OPS scheme on which the access to TFC was waived. However, while the provider / PRSA administrator can pay out the TFC in these instances there have been cases where Revenue have gone back to individuals directly where they have become aware of the payment of TFC and they have connected this to an earlier redundancy payment which included the uplift for the waiver of TFC.
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Smoneen,

What did the Revenue do in these cases? [An individual waives his right to a TFLS from an Occupational Pension Scheme and remains true to this waiver?]
 
This is all noise. The legislation deals with lump sum payments from an occupational pension scheme. A PRSA is not an occupational pension scheme. There have been no instances of Revenue “going back” and “connecting payments” from a PRSA to a previous redundancy. It can’t happen based on the current rules.
 
Thanks Gordon,

Illuminating thread in many ways.

So this presents a particularly interesting option for those with greater than 15 years occupational scheme membership and who waived the right to a TFLS from an OPS.
 
JimmyB99 said:
Thanks Gordon,

Illuminating thread in many ways.

So this presents a particularly interesting option for those with greater than 15 years occupational scheme membership and who waived the right to a TFLS from an OPS.
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The 15 year part is also a red herring. That wasn’t the rule, but it’s gone anyway.
 
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