# Pension Leaving Options - Tax Free Lump Sum Query



## IRCA (26 Aug 2013)

Hi,

I am turning 50 soon and as such I am planning to draw down the max cash possible from a rather small PRB that was created from previous employment.  The last Fund Value statement I received in June this year stated the value of the fund was €38k.

When I contacted Irish Life to informing them what I want to do they gave me an estimate of €18,500 as the Revenue Maxumum cash tax free lump sum.

I am having difficulty in understanding how they arrived at that amount as it is higher than the 25% of the fund value that I was expecting.  Would anyone have any insight?

Here are some details:

Fund Value@ 30/6/13:  €38,190  (Consensus Fund, Units held 10,506.08)
Final Salary:  €52,176
Years service: 6.5 years  (made redundant)

Irish Life won't give me more details on my leaving options until I actually reach my 50th and I don't want to over-estimate the potential Lump Sum I can draw down, so any insights would be appreciated!

Thanks

IRCA

EDIT: Should add this was a DB scheme that was wound up (Motorola)


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## Gervan (26 Aug 2013)

I've no details of the workings, I'm afraid, but I'm sure your final salary figures in the computation.
I recently drew down my tax-free amount from an employment pension I had saved into, and that was also higher than 25% of the value of my fund.


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## IRCA (26 Aug 2013)

Gervan said:


> I've no details of the workings, I'm afraid, but I'm sure your final salary figures in the computation.
> I recently drew down my tax-free amount from an employment pension I had saved into, and that was also higher than 25% of the value of my fund.



Thanks!

I was thinking it might have a bearing alright - just didn't want to get my hopes too high!!!


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## SoylentGreen (27 Aug 2013)

Just a question. Does everyone take the tax free lump sum and is it advisable to do this?


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## APG (27 Aug 2013)

If your previous employer scheme was defined benefit, you do not have the option of taking 25% of the fund tax free. Instead the tax free lump sum is worked out as the deferred lump sum entitlement under the scheme when you left service indexed up in line with inflation since then.

If the balance in your fund after taking this lump sum is < €20,000 (and you have no other pension benefits) it can be paid out as a taxable lump sum subject to PAYE. Otherwise you will have to use the balance to buy a very small pension.

You're just at the edge at the moment, it seem to me, of your balance after taking lump sum, being less than €20,0000.

Yes ...it nearly always makes sense to take the tax free lump sum; otherwise you end up taking taxable pension which dies with you.


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## Baracuda (27 Aug 2013)

If the PRB originated from a defined benefit scheme you would only be able to take TFLS under the "years service" rule which is what Irish Life has quoted you and this is why you are getting a higher TFLS than you were expecting, however the remaining capital must be used to purchace an annuity

If you were in a defined contribution scheme you have two options

1. being the same as a defined benefit scheme

2. 25% TFLS and with the remaining capital purchace an Approved Minimum Retirement Fund. You can not cash in the AMRF until you are 75 however you can cash in any surplus over the original investment every year i.e. you invest €50,000 and the fund makes €2,500 this year, you can take this. The following year the fund goes down to €47,500, you will have to wait until it goes over the €50,000 until you can make a further withdrawal as it is less than the original capital invested.


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## IRCA (27 Aug 2013)

Thanks for the info guys - will post final details when I have them - might be useful to others!


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## JoeRoberts (28 Aug 2013)

You should also check whether your salary on file with Ir Life is correct.
If you had non pensionable benefits such as company car, VHI or annual bonus it is unlikely they are included in the final salary that Ir Life have on file.
In such case they can be used to increase your tax free lump sum calculation.

The lump sum calculation is 3/80 x 6.5 x 52,176 = 12,717. However the salary figure is allowed indexation for CPI. I don't have the rates to hand, nor do I know when you left, but if it was say 3% on average over 13 years then that would bring the sum to around  18500.


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## IRCA (13 Sep 2013)

HI

Final TFLS came in at €13,350 - lower than expected but more than the basic 25%


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## lolograce (4 Oct 2013)

*state pension*

I paid into a state pension for over two years.  I have left the post and was wondering if I could withdraw the funds paid into the pension.


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