# Cash lump sum from two pensions?



## IsleOfMan (14 Dec 2015)

My wife worked for a company for a few years which was in turn taken over by another company where she continued to work for a similar number of years.

She will get a pension from the first company next year. It will be less than €1k per annum.
She has been offered about €450 per year, pension or c€350 per year plus €950 lump sum.

The second company pension will kick in shortly after. It will be a larger pension. If she opts for the lump sum and lower pension now will this affect the way she can take her second pension?

Can you take lump sums from two pensions upfront?

Anything else we should be aware of?

Thanks


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## SlugBreath (17 Dec 2015)

I am not sure whether you can take two lump sum amounts tax free or not? but something to consider might be....
Having two pensions being paid monthly might mean having to pay more tax when the State Old Age pension kicks in.  By taking two cash amounts would reduce your monthly income and could mean that you end up paying less tax.


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## Gerry Canning (17 Dec 2015)

slugbreath,

The first pension is so small, any tax implications are also small.
The 2nd is larger by how much?
 I would be concerned that dwelling on tax implications on (retired) income becomes a decider.Try to get nuff to retire on first !
I think on retirement its better  to complain about being taxed on extra pension income above old age pension , rather than complain about only having old age pension!

Isle of Man,
There are umpteen things to consider .
1. What age you are today.
2. What funds have you built up.
Then make a stab at what age you can afford to retire and live comfortably.
eg , to get an annual pension of 1,000 @ 65 , you need a pension fund of circa 25,000.


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## IsleOfMan (17 Dec 2015)

Hi Gerry. Do you know if it is possible to take two lump sums tax free?  The first lump sum as stated will be about €950 and the second lump sum will be about €3k.


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## Conan (17 Dec 2015)

Assuming that both pensions are Defined Contribution, then she can take 25% lump sum from each. Based on your numbers above, this amount will be tax free. 
You seem to be saying that the balance of both funds will be paid by means of an Annuity. That income will be potentially liable to tax, so maximising the tax free lump sum is the most tax effective strategy. But if the schemes are Defined Contribution buying an Annuity with the balance is not the only option. She could invest the balance into an Approved (Minimum) Retirement Fund. 

If the schemes are Defined Benefit, then the rules are different. The lump sum is based on years of service and Salary. This might produce a higher lump sum and thus be more tax effective. But in this case the balance of any fund must be in the form of an Annuity.

Can you post more information as to whether the schemes are DC or DB?


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## Steven Barrett (18 Dec 2015)

It's hard to give a definitive answer with so little information. What Conan has said above is correct. 

If she is in a defined benefit scheme or is going down the 150% tax free lump sum & annuity route, there is different treatment. As one company was taken over by the other, the Revenue will probably deem her service as being continuous with the same employer. If this is the case, she can get two lump sums but the aggregate amount paid out cannot exceed the Revenue maximums, so the second lump sum may be reduced to reflect the lump sum already paid out. 

She should talk to the scheme administrators who have all the scheme details and know the scheme rules. 

Steven
www.bluewaterfp.ie


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## Kimmagegirl (20 Dec 2015)

SBarrett said:


> As one company was taken over by the other, the Revenue will probably deem her service as being continuous with the same employer. If this is the case, she can get two lump sums but the aggregate amount paid out cannot exceed the Revenue maximums, so the second lump sum may be reduced to reflect the lump sum already paid out.



Steven. What are the Revenue maximums?  I would imagine that many people have lots of bits of pensions, not amounting to much.


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## Steven Barrett (21 Dec 2015)

Under the Revenue rules, companies are allowed to fund for pension based on years service (usually 1/60th of final salary for each years service). 

Everything is dependent on the size of your fund and years service. You may be able to increase payments on the uplifted scale. 

There are too many rules to give a generic rundown of them, I'd be here all day. 


Steven
www.bluewaterfp.ie


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## IsleOfMan (6 Jan 2016)

Thanks Conan and Steven. Sorry for the delay in getting back. I had to wade through old correspondence.

My wife has a defined benefit pension with the company that she originally worked with. She only worked with them for about 4 years before her company outsourced part of their operation to another company.
This other company operated a defined contribution pension. She only worked with these for about 4 years.

She has been offered a small lump sum from her first pension plus reduced pension.

I am assuming that she will be offered a similar deal/amount from her second pension.

The fact that one is defined benefit and the other defined contribution can this effect the cash amount that she can take from each pension.


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