PRSI Deductions from ARF and Rebalancing of Portfolio

L

LiferT

Registered User
Messages
29
Good morning all

I have a technical question about how PRSI payments are taken from an ARF and how this will affect the rebalancing of my portfolio on an annual basis. This could also apply to other withdrawals from the ARF.

I intend to retire two years before I can draw my state pension at the age of 66. I will be drawing my income from an ARF during these two years, from which PRSI contributions will be deducted.

I understand that PRSI is levied at Class S, and as such is reckonable as a valid contribution towards the social welfare pension as long as a minimum of €500 is paid annually.

In order for 52 PRSI contributions to be credited, do these need to be paid weekly/ monthly or can they be paid as a lump sum?

Do more frequent withdrawals from the ARF (not just PRSI but also income and tax deductions) complicate the annual rebalancing of the portfolio?

Is it preferable to make just one set of deductions a year from the ARF and then rebalance the portfolio, and are there increased charges for more frequent withdrawals?

Many thanks

LT
 
If you want 52 S class contributions set up monthly withdrawals. There are no extra charges for this.
Your yearly withdrawals are set at 4% of the total value at a specified date and this decides how much is withdrawn. Say the 4% was 6000 euro. This would result in 500 euro per month. The tax USC and Prsi will remain the same as it's charged on the 6000 euro.
 
Last edited:
Are you under pressure to meet the PRSI contributions for a full contributory state pension?

State Pension (Contributory)

The State Pension (Contributory), previously called the Old Age (Contributory) Pension, is payable to people aged 66 and over who have worked and paid enough social insurance contributions.
www.citizensinformation.ie www.citizensinformation.ie
Or maybe you have enough already?
You can check your records via MyWelfare.

MyWelfare Homepage

MyWelfare is the online home of welfare services. It allows you easy online access to a range of services
services.mywelfare.ie services.mywelfare.ie
 
Hi Clubman

Yes, I am a few years short of qualifying for a full social welfare pension, so every contribution helps.

LT
 
LiferT said:
Is it preferable to make just one set of deductions a year from the ARF and then rebalance the portfolio, and are there increased charges for more frequent withdrawals?
Click to expand...

That's an investment timing issue really. It's the mirror image of the similar question - is it better to invest monthly or in annual lump sums? Over a period of years it's unlikely to make much difference.

One point that may be relevant to you when choosing your ARF... if you are splitting the ARF investment across a number of different funds, some ARF providers have the ability to allow withdrawals from a specific fund; others don't. Example - you invest your ARF 25% into each of Fund A, Fund B, Fund C and Fund D. Some providers will allow you to make your withdrawals (monthly or annual) from just Fund A if you choose to. Or just Fund B etc. Other providers will always split withdrawals 25% from each of the four. If you're interesting in occasional rebalancing, this could be relevant.
 
Hi Dave

Interesting point about different funds in the ARF.

Ideally to mitigate sequence of return risk/downturns in the market, I would like to follow the bucket approach, with 2 years income set aside in a cash account within the ARF. I would like to have two other buckets containing large cap, dividend producing/value stock and income generating bonds to top up the first cash bucket. I would have another bucket containing growth stocks for the long term performance of the portfolio.

Would such a scenario be too complicated to setup and / or would the ongoing charges involved be too prohibitive?

Thanks

LT
 
LiferT said:
Hi Dave

Interesting point about different funds in the ARF.

Ideally to mitigate sequence of return risk/downturns in the market, I would like to follow the bucket approach, with 2 years income set aside in a cash account within the ARF. I would like to have two other buckets containing large cap, dividend producing/value stock and income generating bonds to top up the first cash bucket. I would have another bucket containing growth stocks for the long term performance of the portfolio.

Would such a scenario be too complicated to setup and / or would the ongoing charges involved be too prohibitive?

Thanks

LT
Click to expand...

The above scenario is very possible, either with one of the insured ARF providers that allow you to choose which bucket withdrawals come from, or from a self-administered ARF. Such functionality doesn't cost extra. It's a system thing at the provider level - they either have it or they don't.
 
Hi LT

It’s a bit of an aside, but given your statement “I intend to retire two years before I can draw my state pension at the age of 66. I will be drawing my income from an ARF during these two years, from which PRSI contributions will be deducted.” I wondered if you are expecting to receive the “Benefit Payment for 65 Year Olds”. If so you may have an issue. It appears that Social Protection deem those to be in receipt of distributions from an ARF to be in employment (this is why Class S applies) and where the distributions exceeds €7,500 on an annual basis or €144 on a weekly basis the application for this benefit may be declined. Further details in this thread:

Eligibility for 65 yr. payment.

Okay, so you were not registered as a job seeker and considered unemployed. Maybe then you could not claim your "investment employment" as subsidiary employment. I have sent an email to Welfare to enquire if I will qualify. I phoned today and asked if investment income would be considered as...
www.askaboutmoney.com

Of course you may have a different plan in mind !

I don't wish to derail this thread, so any comments on the “Benefit Payment for 65 Year Olds” should be posted to the thread that i linked to.
 
You must log in or register to reply here.
Back
Top