Our family came to Ireland in 1999. We are originally from outside of EU but from 2006 have Irish citizenship. Our second child was born in Ireland, we consider Ireland as a home country and plan to remain here. We do not have any assets / pensions outside of Ireland.
I am the sole earner. My wife is a homemaker - looking after children and now grandchildren. In 2019 she underwent a surgery due to breast cancer and, touch wood, it was successful. Otherwise, we are in reasonably good health.
I have been with the same company for almost 25 years and plan earlier retirement after my 25th anniversary in September this year.
For the pension, I am considering an option with ARF+200K tax-free lump sum .
We have never used any Social Welfare except for Child Benefits / paying taxes and thus not very familiar with the system.
Would really appreciate any advice and feedback on our financial / pension situation (especially in relation to the state pension).
Personal details
Age: 58
Spouse's age: 53
Number and age of children: Two. First has own family and lives separately, second is 23 and lives with us (student, starting the last year of university this September)
Income and expenditure
Annual gross income from employment or profession: 74K
Annual gross income of spouse/partner: 0 (housewife)
Monthly take-home pay: €3,000 (after taxes, medical insurance deducted from salary and maxing out my pension / AVC )
Type of employment: Employee
Employer type: Multinational company
In general are you:
(a) spending more than you earn, or
(b) saving?
Saving
Summary of Assets and Liabilities
Family home value: €335,000
Mortgage on family home: €30,000
Net equity: €305,000
Cash: €25,000 (in current / deposit accounts - all joint accounts)
Defined Contribution pension fund: €910,000 - all in my name. No pension contributions for my wife (more details below).
Company shares: None
Buy to Let Property value: None
Buy to Let Mortgage: None
Total net assets: c. €1,350,000 includes €100K of other investments (details below) + €10K family car (no loan on it)
Family home mortgage information
Lender: AIB (automatically transferred from Ulster bank after its departure from Irish market)
Interest rate: 5.1%
Type of interest rate: tracker, variable, fixed.
If fixed, what is the term remaining of the fixed rate?
If tracker, what is the margin e.g. ECB + 1%: Tracker, ECB + 0.85%
Remaining term: 6 years ( will be shorter due to regular over-payments while with Ulster bank)
Monthly repayment: €370
Other borrowings – car loans/personal loans etc
No other loans
Do you pay off your full credit card balance each month? Pay in full
If not, what is the balance on your credit card? NA
Pension information
Value of pension fund: €910,000
State pension: At the end of August I will have 52 weeks x 25 years =1,300 PRSI contributions (class A)
Buy to let properties
No other properties
Other savings and investments:
Investment plan with Irish Life (Multi Asset portfolio 5 & 6). Started in 2016: Current value €44,000 (after mandatory 8-years' exit tax was applied earlier this year). Continue to invest monthly €150. This is a joint account.
ETFs with T212 (7 ETFs in 2 pies) Started about one year ago by transferring several lump sums and drip-feeding them weekly by €250. Current value around €33,000 (not adding new funds fro now). This account is in my name.
Alternative investments: Current value €35,000. Invested several years ago and just holing now - i.e. no trades or regular investments. This is account in my name.
Total value of these investments: c. €100K (rounding down due to volatility of the investments)
Other information which might be relevant
Life insurance: No
What specific question do you have or what issues are of concern to you?
Apologies for the large number of questions!
I have tried to approach several financial advisors but found that, unfortunately, they cannot cover full range of questions. Some would have knowledge on certain topics but lack in other areas - e.g. would advise about investments but could not answer about state pension. I am also discussing these questions with Irish Life advisor and my company's pension provider - but would like to get a second opinion too.
Here are my questions grouped by topics:
1. State Pension:
Please feel free to comment on all topics or some specific questions.
Thank you in advance for any suggestions!
I am the sole earner. My wife is a homemaker - looking after children and now grandchildren. In 2019 she underwent a surgery due to breast cancer and, touch wood, it was successful. Otherwise, we are in reasonably good health.
I have been with the same company for almost 25 years and plan earlier retirement after my 25th anniversary in September this year.
For the pension, I am considering an option with ARF+200K tax-free lump sum .
We have never used any Social Welfare except for Child Benefits / paying taxes and thus not very familiar with the system.
Would really appreciate any advice and feedback on our financial / pension situation (especially in relation to the state pension).
Personal details
Age: 58
Spouse's age: 53
Number and age of children: Two. First has own family and lives separately, second is 23 and lives with us (student, starting the last year of university this September)
Income and expenditure
Annual gross income from employment or profession: 74K
Annual gross income of spouse/partner: 0 (housewife)
Monthly take-home pay: €3,000 (after taxes, medical insurance deducted from salary and maxing out my pension / AVC )
Type of employment: Employee
Employer type: Multinational company
In general are you:
(a) spending more than you earn, or
(b) saving?
Saving
Summary of Assets and Liabilities
Family home value: €335,000
Mortgage on family home: €30,000
Net equity: €305,000
Cash: €25,000 (in current / deposit accounts - all joint accounts)
Defined Contribution pension fund: €910,000 - all in my name. No pension contributions for my wife (more details below).
Company shares: None
Buy to Let Property value: None
Buy to Let Mortgage: None
Total net assets: c. €1,350,000 includes €100K of other investments (details below) + €10K family car (no loan on it)
Family home mortgage information
Lender: AIB (automatically transferred from Ulster bank after its departure from Irish market)
Interest rate: 5.1%
Type of interest rate: tracker, variable, fixed.
If fixed, what is the term remaining of the fixed rate?
If tracker, what is the margin e.g. ECB + 1%: Tracker, ECB + 0.85%
Remaining term: 6 years ( will be shorter due to regular over-payments while with Ulster bank)
Monthly repayment: €370
Other borrowings – car loans/personal loans etc
No other loans
Do you pay off your full credit card balance each month? Pay in full
If not, what is the balance on your credit card? NA
Pension information
Value of pension fund: €910,000
State pension: At the end of August I will have 52 weeks x 25 years =1,300 PRSI contributions (class A)
Buy to let properties
No other properties
Other savings and investments:
Investment plan with Irish Life (Multi Asset portfolio 5 & 6). Started in 2016: Current value €44,000 (after mandatory 8-years' exit tax was applied earlier this year). Continue to invest monthly €150. This is a joint account.
ETFs with T212 (7 ETFs in 2 pies) Started about one year ago by transferring several lump sums and drip-feeding them weekly by €250. Current value around €33,000 (not adding new funds fro now). This account is in my name.
Alternative investments: Current value €35,000. Invested several years ago and just holing now - i.e. no trades or regular investments. This is account in my name.
Total value of these investments: c. €100K (rounding down due to volatility of the investments)
Other information which might be relevant
Life insurance: No
What specific question do you have or what issues are of concern to you?
Apologies for the large number of questions!
I have tried to approach several financial advisors but found that, unfortunately, they cannot cover full range of questions. Some would have knowledge on certain topics but lack in other areas - e.g. would advise about investments but could not answer about state pension. I am also discussing these questions with Irish Life advisor and my company's pension provider - but would like to get a second opinion too.
Here are my questions grouped by topics:
1. State Pension:
- At the moment I have about 1300 PRSI contributions (class A) which is short of 2080 required for the full Contributory pension. I know that I can increase number of my contributions by taking more than €5,000 per annum from my ARF. This way I can add 8 more years of contributions (about 52x8=416 - class S). Is there any other way to increase the contributions? I do not have any gaps in my employment history in Ireland, so I presume I cannot buy additional years.
- Also, I know that I can postpone State Pension until I am 70 years old. Would I be able to continue to make PRSI contributions via ARF withdrawals in those years where I am between 66 and 70 years old?
- Would I have to register as a Jobseeker after I leave my current job? Are there any pro- / cons- in doing this (in respect of the PRSI contributions).
- Similarly, if in the future I take some job(s) / start small business - would it affect the class S contributions?
- My wife does not have any work-related PRSI contributions. However, she was receiving Child Benefits for more than 16 years. If I understand correctly, my wife can be added as a dependent adult to my pension (subject to means test)? What part of our assets would be taken into the test? I have specified joint accounts where applicable. Is it correct to assume that she would have a full allocation if these joint accounts were less than 20K in total? Would be ARF or any other investment accounts under my name taken into her means calculations?
- Is there any condition on the use of ARF after I take a lump sum? E.g. withdrawals from ARF must be started within 9 or 12 months after lump sum withdrawal. I know there will be a notional drawdown of 4% once I am 61, but is there some other mandatory requirement(s) before that age?
- Is there any good reason to take larger lump sum - i.e., in excess of tax-free 200K? I know there will be 20% tax on the additional amount. Would USC and PRSI apply to the excess too? If not, maybe it is better to take it now, to reduce USC and PRIS on future drawdowns. We do not plan any big purchases except for a car upgrade (current one is 10-years old). Currently our monthly spend is about 3K. It might be 30% bigger for the next couple of years if we take more travel (which we intend to do). However, our annual spend will likely to stay under 45-50K per annum. The lump sum + ARF withdrawals should cover it for 8 years and then state pension would kick in too.
- Initially we planned to cover our living expenses by using money from the Irish Life plans. It should be enough for one year or so. Therefore, I did not plan to withdraw any money from the pension fund for another year thus allowing it to grow tax free. However, considering that ARF withdrawals would be required to maintain PRSI contributions, I wonder if we should use Irish Life for investments instead and put part of the lump sum (about 50K) into it? The performance of the Irish Life plans was not great so far. It did not show any real growth (after charges) until the last year and even now it is less than the growth in T212 account. Its only advantage is that taxes are deducted at source, and it has been done already earlier this year, so there will be no tax deductions for another 8 years.
- Is there any other comparable account(s) I can use for mid-term investments (5 years or so)? For example, I was considering Zurich plans but not sure if initial charges will eat up any gains for the first five years (as it was in case of Irish Life). T212 seems to be doing well, but I am cautious about adding more funds into account there as their money-guaranty is no very clear.
- Is there any way to continue with pension contributions as it seems to be the most tax efficient approach?
- Currently I have a family health insurance via my employer - Simply Connect Plus from Laya. What would be a good substitute for it as it now have to be paid in full?
- Would Life Insurance make any sense for our situation?
- Is there any other financial decision I must consider?
Please feel free to comment on all topics or some specific questions.
Thank you in advance for any suggestions!