IBM Mercer Pension

[murphaph1]

Yeah I think so too and the €500 VC1 contributions are even tax deductible on my German tax return so there's that too. They aren't really costing me €500 because of that, more like €330 I suppose. I don't think it's worth the risk to save such a small amount and I can leave my DC pension fund invested longer at the cheaper management fees I can avail of under the IBM pension plan (0.08% with a passive global developed markets equity fund-That's less than I pay for any of my ETFs on Trade Republic!) as I don't need the money and can afford to leave it in the DC fund until I am forced to buy an ARF or take an annuity (very unlikely) at 65.

 

[NoRegretsCoyote]

There should be no PRSI liability on ARFs. They are a pension and should be treated the same as Occupational pensions and Annuities i.e M class which is not charged for.

I can see both sides of the argument but an ARF is very different animal from an annuity or a DB scheme. An ARF holder has almost complete flexibility on when and how much to draw down, and it can also be passed on to heirs. Rules around DB pension holders are much tighter.

Slapping PRSI on ARFs is a money grab by the government. Most ARF holders probably have 40 years of Prsi contributions before retirement.

I'm not so sure. I've seen several threads here from retired people in their late 50s and early 60s using ARF income to build up a full entitlement to the state pension contributory.

 

[S class]

I don't think it's a glitch the "less than 5k" withdrawals resulting in 52 class S stamps. Our resident expert on this matter posted on this in an older thread. It is "expected behaviour" and the ARF drawdown can be as small as you like. The critical thing is that if it is under 12,500 that the withdrawals are made at least monthly! See here:

Retiring just short of 10 years contributions for Irish pension - options ?

I'm retiring shortly after having accumulated 8.5 years of contributions towards receiving an Irish pension. I already have a full UK pension (having 35 years UK contributions) to come but as I understand it I need to have 10 years contributions, in the Republic, in order to receive a small...

www.askaboutmoney.com

This situation seems to have been changed by DSP in 2022. See the link on my post #13. Click the find out more button.
The present rules seem to be as follows
If the ARF drawdowns are less than 5000 euro, no Prsi is due and the holder can apply for a refund of any Prsi deducted by the provider. No S class contributions are awarded.
If the ARF drawdowns are 5000 euro or more per year Prsi is due and the holder will be awarded 52 S class contributions. It doesn't matter if the drawdowns are monthly or yearly.

 

[S class]

I'm not so sure. I've seen several threads here from retired people in their late 50s and early 60s using ARF income to build up a full entitlement to the state pension contributory.

You will probably find that these are pre 95 retired public sector B or D contributors. Any person who has paid A class Prsi during their working life will almost definitely have more than 520 full rate paid contributions at early retirement and these people can continue their contributions using A class credits.
It's the B and D contributors who have less than 520 paid A contributions at early retirement who need extra paid contributions to take them to the magic 520 level, that gain from the extra S class from an ARF.

 

[murphaph1]

This situation seems to have been changed by DSP in 2022. See the link on my post #13. Click the find out more button.
The present rules seem to be as follows
If the ARF drawdowns are less than 5000 euro, no Prsi is due and the holder can apply for a refund of any Prsi deducted by the provider. No S class contributions are awarded.
If the ARF drawdowns are 5000 euro or more per year Prsi is due and the holder will be awarded 52 S class contributions. It doesn't matter if the drawdowns are monthly or yearly.

Oh thanks for that! I didn't click the find out more button the first time but there is vital information in that pdf:

We are aware of
cases where the Revenue and Department of
Social Protection have identified such cases and
refunded the PRSI paid whilst also rescinding any
PRSI credits which may have been accrued for
that individual in the year in question.

That is exactly the fear I would have so I will definitely stick to my bulletproof VC1 contributions and just leave my DC fund invested until my regular retirement date.

 

[murphaph1]

For completeness: I have moved from the (lifestyled and partially actively managed, but still in the "growth" phase) Mercer Long Term Growth Fund to two non-lifestyled passive funds based on the MSCI Developed Markets (70%) and MSCI Emerging Markets (30%) funds. I am not risk averse and these funds can just stay invested until I'm 65 and go straight into a couple of similar ARFs that maintain the 70/30 ratio at that time. I am glad to have discussed this on here, making me think out loud about all this stuff, so thanks for your thoughts. The fees for the two purely passive funds are 0.06% and 0.08% respectively, a bit less than the 0.14% on my old fund (which isn't a huge saving in fairness but every little helps). I will just leave things alone now for another 22 years