Pension options

[littlefinger]

I contributed to a pension via an employer I worked for over the course of 15 years. I have not worked for that employer for a couple of years as I emigrated. My understanding is that I could draw down that pension when I reach 50.

This may seem like a stupid question but I have to ask just so I haven't misunderstood anything....if the pension starts from 50 years of age, then the amount paid out will remain consistent up until I pop my clogs? What I mean is, by the very nature of pensions, they don't 'run out' as such based on what you managed to throw into the pension pot?

If I call off the pension, are there any tax issues for someone living outside the country?

If for some reason, plans were to change and I returned to Ireland - and decided to work, what would be the implication given that I would have been drawing down this pension already at that time?

Is it correct to assume that if I have sufficient investments/capital to support myself - now and in my older years - that its more efficient to call this pension off at 50 rather than wait? I suppose my thinking here is that even though it will be much more meagre (as it will have been vested over a shorter time period), payments are likely to run for longer. i.e. take the lesser amount at 50 - rather than a greater amount at 66 - and benefit from an additional 16 years of payments (provided of course I don't shuffle off this mortal coil in between times).

 

[ginslia]

Unfortunately pension is not a magical money tree! How valuable it is to you depends on a lot of factors such as:
1) what type of pension was it - defined benefit, defined contribution, hybrid, scheme integrated with State Pension
2) what is the normal retirement age per the scheme
3) current valuation or transfer value etc

Best case scenario - it was a Defined Benefit scheme based on final salary, and the scheme is solvent. You had 15 years service, so *best* you can hope for is 25% (15yr/60) of your final salary payable for life from the normal retirement age of the scheme (usually 65, sometimes 60). Early retirement options are at the trustees discretion (say on grounds of ill health).

Otherwise - the current value (or transfer value for DB scheme) can be turned into an annuity (fixed income for life) based on actuarial calculations that take your life expectancy and other factors into consideration. Whatever income this generates is taxable here (payback for the tax relief on the contributions when paid in).

Get in touch with someone at the company or the pension trustees and get an up to date statement and explanation of the scheme.
Plenty of pension calculators from Irish insurance companies or the pensions authority (dot) ie to estimate what kind of annuity you could get.

 

[ArthurMcB]

Could I check what the significance is of "normal retirement age" ?
My occupational scheme recently changed from a normal retire age of 60 to 65. What does this mean for me. Im sorry if I am hijacking the thread.

 

[Steven Barrett]

If it is a defined benefit pension, it is very unlikely that the trustees will allow you to draw down the pension from age 50. And if they do, it will be a drastically reduced amount.

If it is a defined contribution pension, most people take 25% as a tax free lump sum and invest the remainder in an ARF. This is the same as a pension but you can access the money (and pay tax on whatever you take out). You do not have to take any money out of it until you are age 61.

If you purchased an annuity, you would get a very small one as annuity rates are very low and the insurance company would potentially be paying out for a very long time. But yes, in this scenario, they will pay out until you pop your clogs.


Steven
www.bluewaterfp.ie

 

[ginslia]

"Normal retiremement age" has little to do with the State Pension (anymore), or even the age that you must give up work (government trying to remove these type of provisions), and more to do with the assumptions and t&c of the particular pension scheme set up. If you stay working in your current company, you can start to draw the pension at the specified age (and not before).
Usually this is 65, but if you are very senior or work in financial services for example it might be 60.

When the projections are made for your annual statement, the first option is usually based on the Normal Retirement age of the scheme.
If you want to retire early (ie before the Normal Retirement age) then you would need to make other arrangements.

 

[ArthurMcB]

I would have liked to have retired this as early as possible, so if occupational pension scheme changes normal retire age from 60 to 65 thats a bad thing for the pensioner?

 

[50andOut]

I would have liked to have retired this as early as possible, so if occupational pension scheme changes normal retire age from 60 to 65 thats a bad thing for the pensioner?

I imagine this just means that your company wont automatically cease employing you at 60 - it can only be good that you have the option to continue working until 65. I cannot see any downside on this from your perspective.

If you want to retire early, most occupational schemes can be accessed from 50 once you have left the employment.

 

[Steven Barrett]

I would have liked to have retired this as early as possible, so if occupational pension scheme changes normal retire age from 60 to 65 thats a bad thing for the pensioner?

Only really if you are in a defined benefit pension and the trustees are not willing to allow you to access your pension earlier. If you are in a defined contribution scheme, it is a good thing as the trustees are committed to making pension contributions to age 65. You can always retire before then and take the value of the pot at time of retirement. It is better that way than the trustees saying the retirement age is 60 and their obligations to make contributions to your pension cease at that time even if you carry on working because you can't afford to retire.


Steven
www.bluewaterfp.ie