# Old Age Transition Pension & Company Pension.



## sam27 (24 Sep 2012)

Hi,

My father is set to retire in March at 65 and will receive Contributory State Transition Pension.

He has worked with same company for over 40 years and has been told that he can either take 100 euro per week or take €30,000 lump sum tax free and €30 per week after. 

He will also be entitled to another small pension for which he does not know any figures yet.

He has 20 acres of land and does small bit of farming.

Can anyone give advice on what is best thing to do? Tax wise etc. Any advice greatly appreciated


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## Brendan Burgess (24 Sep 2012)

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## Black Sheep (25 Sep 2012)

There's even a possibility that he may not be taxable at all. As you do not say if he is single or married we do not know if there is a second income from a spouse.


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## sam27 (25 Sep 2012)

He is single.


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## LDFerguson (26 Sep 2012)

He should take professional advice but at a very quick glance at your post I would speculate that he will be either tax exempt or subject to tax at the lower 20% rate.  

If so, there's an argument for him NOT to take the lump sum from the company pension scheme.  He's giving up €70 per week for a lump sum of €30,000.  That's an annuity rate of over 12.1%.  To put it another way, if he just takes the €100 per week pension, he'll have recouped his €30,000 in a little over eight years, but will continue receiving the extra €70 per week for the rest of his life.  

Taxation does play a big part in this, so as I say, he should take professional advice before making a decision.


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## sam27 (26 Sep 2012)

LDFerguson said:


> He should take professional advice but at a very quick glance at your post I would speculate that he will be either tax exempt or subject to tax at the lower 20% rate.
> 
> If so, there's an argument for him NOT to take the lump sum from the company pension scheme.  He's giving up €70 per week for a lump sum of €30,000.  That's an annuity rate of over 12.1%.  To put it another way, if he just takes the €100 per week pension, he'll have recouped his €30,000 in a little over eight years, but will continue receiving the extra €70 per week for the rest of his life.
> 
> Taxation does play a big part in this, so as I say, he should take professional advice before making a decision.



Thank you LD for your advice


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## sam27 (26 Sep 2012)

Who would be the best person to talk too for professional advice? An accountant ?

He is old stock and this would be all new to him


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## LDFerguson (27 Sep 2012)

From what you've posted, his tax position is probably more important than the format of his pension, so I think an accountant would be the right person for him to see.  What part of the country is he in?


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## sam27 (27 Sep 2012)

LDFerguson said:


> From what you've posted, his tax position is probably more important than the format of his pension, so I think an accountant would be the right person for him to see.  What part of the country is he in?



Westmeath.  Thanks again


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## JoeRoberts (27 Sep 2012)

Be careful that he gets a quote for the cost of advice if that is the route he chooses.
Also ensure that he doesn't get advice from someone who wants him to invest the lump sum in an investment where the advisor gets a commission from the investment. These people still exist !!

Another consideration is the health of the pension scheme. Even though he would be a pensioner and currently have priority in a windup (but that may change, it has been proposed but not implemented ) his future pension could be reduced if it got into real difficulty. He should ask the trustees for the last annual report and bring that to advisor.

He can earn 18k a year as a single over 65 with no tax. So 5200 from the pension plus the state pension of 11960 brings his income to 17160. Then add his income from the farm and any bank interest to see if he would pay much tax.

As LD says, the annuity rate he is getting for taking cash is not great, but is generally the norm. Many schemes have not updated this "commutation factor" from  what it was when interest rates were higher 20 yrs ago.

Consider also his current health, and what he would do with the 30k. Will he blow it on a Merc? I've seen it many times. With a state pension of 230 pw plus 30 from the scheme he would have 260 a week. What is this in comparison to his current take home pay ?

He can also ask to talk to the company accountant, trustees and maybe the pension administrators. This advice would be free.


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## LDFerguson (29 Sep 2012)

sam27 said:


> Westmeath. Thanks again


 
Tommy McGibney has been my firm's auditor and my own accountant for years and I'd highly recommend him as a knowledgeable, experienced professional.  He posts here on Askaboutmoney.com under .  He's based in Virginia, Co. Cavan.


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## sam27 (8 Oct 2012)

JoeRoberts said:


> Be careful that he gets a quote for the cost of advice if that is the route he chooses.
> Also ensure that he doesn't get advice from someone who wants him to invest the lump sum in an investment where the advisor gets a commission from the investment. These people still exist !!
> 
> Another consideration is the health of the pension scheme. Even though he would be a pensioner and currently have priority in a windup (but that may change, it has been proposed but not implemented ) his future pension could be reduced if it got into real difficulty. He should ask the trustees for the last annual report and bring that to advisor.
> ...



Thank you Joe for your advice. Much appreciated.


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## sam27 (8 Oct 2012)

Thank you LD as well & others.


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