Can I legitimately transfer my pension to a PRSA and then take my 25% lump sum tax free?

I have a defined benefit pension, I no longer work for the company. but I'm approaching pension age and I can draw it down now or convert to a PRSA. I left the company with a redundancy package almost 20 years ago and I signed a waiver with regard to any future tax free lump sum from my pension. My question is, can I legitimately transfer my pension to a PRSA and then take my 25% lump sum tax free?

I would say yes, once you convert the value of your DB pension to a PRSA your previous employer has no further interest, so any written agreement that you had with your employer does not come into effect. But ask the pension trustees.

Clamball said:

I would say yes, once you convert the value of your DB pension to a PRSA your previous employer has no further interest, so any written agreement that you had with your employer does not come into effect. But ask the pension trustees.

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Like with maths problems in school, you got the answer right but the reasoning is wrong, so partial marks

If you have waived your right to a tax free lump sum, you cannot get it under the current scheme. If you take a transfer value and transfer it to another occupational pension scheme or a buy out bond, they ask you if you have previously waived your right to the lump sum on the form. A PRSA does not ask this question.

It is widely accepted that if you transfer from an occupational pension scheme to a PRSA, you regain the right to the tax free lump sum where you have waived that right previously. The Revenue are well aware of this loophole and have mentioned closing it a few times but it hasn't happened yet.

If you are transferring from an occupational pension to a PRSA, you have to get a comparison of benefits done (unless the scheme is winding up or the value is less than €10,000). It cost €1,500 for a DC pension and more for a DB one (I can't find the price off hand).

The question then is if the Revenue do close the loophole, will it be done retrospectively? You can't know for certain but it would be administratively difficult to go back through all the transfers into PRSA and find out which policyholders waived their right. It would be a lot simpler to just add a line to new proposals asking whether the policyholder waived their right.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

Thanks for the replies, Steven and Clamball.
In relation to the comparison of benefits. Shortly after I left the company the company closed of the DB scheme and moved to a defined contribution scheme. Is this the same as winding up the DB scheme?

Qurious BF said:

Thanks for the replies, Steven and Clamball.
In relation to the comparison of benefits. Shortly after I left the company the company closed of the DB scheme and moved to a defined contribution scheme. Is this the same as winding up the DB scheme?

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Are you sure that they didn't simply close it to new entrants but otherwise "parked" it rather than winding it up?

As mentioned in the thread that I linked above (admittedly from 2009 but at least some of the issues mentioned are still valid) giving up the benefits of a defined benefit pension is only something that should be done with full knowledge of the implications. A DB pension can be a very valuable asset!

Qurious BF said:

Thanks for the replies, Steven and Clamball.
In relation to the comparison of benefits. Shortly after I left the company the company closed of the DB scheme and moved to a defined contribution scheme. Is this the same as winding up the DB scheme?

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No. Winding up the scheme is closing it down completely and transferring everyone's benefits to another arrangement. Yours is just closed to new entrants.

In a similar situation with an old DC pension from a company that was wound up. I can't find any paperwork but I think I signed the waiver to get the extra tax free redundancy cash (I was young then), The DC pension was put into a PRB (as I did not communicate any preference to the trustees at the time). Many years later I transferred it to a different PRB. Can I now transfer a PRB into a PRSA?