Drawing down taxable lump sum

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Free-at-last

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I’m considering drawing down the entire €50k pension pot, from my last employer, and I’m wondering whether this is my best option. I’m married, just turned 60, with an occupational pension from August. My total earnings this year, including my pension, will be €22k, as I’ve been unemployed since last year.
I changed jobs four years ago and the pension pot came from this job. My thinking is that this year I’ll have the remaining tax allowance, from my wife and I, available to offset against the taxable element. Next year my income will be €45k+. What do others think?
 
Do you mean you get 25% of the 50k tax free

Pay tax on remainder but draw down that also

In effect you night get 37k
 
moneymakeover said:
Do you mean you get 25% of the 50k tax free

Pay tax on remainder but draw down that also

In effect you night get 37k
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That’s exactly what I mean. Next year I’ll be earning more, due to my pension, so I’d expect to have to pay the higher rate of tax on all the taxable element.
A helpful guy in Revenue also suggested that I should wait until near the end of the year to draw down the taxable element.
 
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Have you been presented with “Leaving Service Options”?

What does the ‘1.5 times salary’ option look like? Might it get you the entire €50k tax-free?

If the 25% route is the only workable option, might you take the €12.5k tax-free, top up your income by €23k to €45k, keeping you within the 20% rate band? Then leave the other €14.5k in your ARF? It sound like you won’t need an AMRF.
 
Gordon Gekko said:
Have you been presented with “Leaving Service Options”?

What does the ‘1.5 times salary’ option look like? Might it get you the entire €50k tax-free?

If the 25% route is the only workable option, might you take the €12.5k tax-free, top up your income by €23k to €45k, keeping you within the 20% rate band? Then leave the other €14.5k in your ARF? It sound like you won’t need an AMRF.
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I have a buy out bond as the employer relocated overseas. I was only with them for 4 years so the 25% route looks like the only workable option.

My options are:
  • Tax free lump sum.
  • Taxed lump sum.
  • Pension
  • AMRF ( Not required)
  • ARF.
Your suggestion sounds sensible, wasn’t thinking of splitting it. What I don’t know is what setting up the ARF costs, and if it would wipe out the savings from waiting. Any idea?

Why is it better to wait til the end of the year to take a taxable lum sum, do you know?

Thanks a million for the information...
 
There should be no additional cost to setting up an ARF (i.e. whatever you’re paying for your BOB should be replicable for the ARF).

I’m not sure about waiting until the end of the year; perhaps it’s to get the benefit of the full year’s credit and standard rate cut off point? That’s purely a cashflow point though; it ends up being the same whether it’s in July or September. A bit of a red herring basically.
 
Gordon Gekko said:
There should be no additional cost to setting up an ARF (i.e. whatever you’re paying for your BOB should be replicable for the ARF).

I’m not sure about waiting until the end of the year; perhaps it’s to get the benefit of the full year’s credit and standard rate cut off point? That’s purely a cashflow point though; it ends up being the same whether it’s in July or September. A bit of a red herring basically.
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Well then, your suggestion is the way I’ll go - seems to be a no brainer.

Thanks again.
 
I'm in a similar position... looking for advise too.

I have two pension pots ( deferred pensions from employment in two previous IT companies). They total 50K€ too.

I'm seriously considering taking the 25% (12.5K€) plus taking the balance as a taxable lump sum... ( want to use the lump sums to pay down debt which is costing me 5% pa interest for the next 6 years )..

However how do I check what tax/usc -rate - I will actually pay on the 37.5K€ (I don't know if it will be at 20% or 40% tax rate...will revenue tell me that if I ring them?

Thanks
 
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