Hit SFT but want to keep working

G

Gravelking

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I’m in the very fortunate position of hitting the SFT in my mid 50’s with 9 years until retirement from my company. I would like to understand if there is any way I could leave the scheme now, crystallise my retirement benefits now, take the lump sum, set up an ARF and then keep working until my normal retirement age ? My current understanding is that scheme rules would only permit this at age 60 - is this also a legislative requirement ? Thanks for any guidance anyone may have.
 
Most (you would need to check with pension administrator) occupational pensions schemes can be accessed at 50. Is yours a PRSA, DB or some different type of scheme?
 
You can't take retirement benefits until age 60 unless you leave the employment related to that pension
 
Another consideration is that SFT will potentially increase to 2.5 million in the budget and indexation will be added ( speculation at moment but worth noting)
 
You could switch all funds to cash now to eliminate any investment risk. The benefit to you of any future fund growth is limited by the additional tax, but you'd suffer any fund falls in full.

Will your employer agree to stopping employer contributions to the pension scheme and paying them to you in additional salary instead? You'll still pay tax on the extra salary but it's better than the tax for exceeding the SFT.

If the SFT is increased in the future, you could ask them to start again.
 
Does your entire pension pot relate to your current employment? In other words, is there any scope to retire part of your pension pot while continuing with your current employer?

Also, bear in mind that any tax paid on retirement lump sums can be credited against any excess tax. The first €200k is tax-free and any lump sums between €200k and €500k are taxable @20%. In effect that means there is scope to grow your pension pot by an additional €150k over the SFT before any excess tax become payable.

Beyond that, I would echo the advice to go to cash and stop making personal contributions (unless they come with a generous employer match).
 
Sarenco said:
Beyond that, I would echo the advice to go to cash and stop making personal contributions (unless they come with a generous employer match).
Click to expand...
They don't feel that generous when each one results in a massive tax bill!!!

But 100%, move to cash and if there's other pension pots, consider maturing them. It is likely that the SFT will be increased in the Budget in October (no Irish Gardai applying for the Commissioners job solely because of the SFT!!!). Don't know how much. Rumours circulating of an additional €500,000, which will be some amount in one go!
 
The only other practical step that I've heard of is where funds can (in some situations) be transferred from Occupational Pension Scheme or PRB to (say) 2 PRSAs. This would currently necessitate the cost of a certificate of benefit comparison.

You could use PRSA 1 to mature a fund of (say) €2,150,000 - take your tax free cash and ARF/VestedPRSA the balance. You could defer drawing the excess value (over SFT) to 75 on PRSA 2. On death before 75, the chargable excess on the value of PRSA 2 would not be payable.

What I don't know is whether PRSA 2 might be eligible for the cumulative effect of any (Budget) increase in SFT between crystalizing PRSA 1 and forced crystalization of PRSA 2 at 75.


Updated 22/08/2024 - PRSA 2 would be tested against the relevant SFT at that time maturing it whilst also taking into consideration that they had already crystallised €2.15m.



Gerard

www.prsa.ie
 
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