Imminent redundancy, inheritance, helping the kids, and allowing for future expenses

F

figrolls

Registered User
Messages
35
We'd love to get some advice on our situation please, thank you


This is Wife posting .



Personal details

Your age (Wife) : 56
Husbands Age : 63

Number and age of children: 2 – ages 21 & 19


Income and expenditure
Annual gross income from employment or profession Wife : €60k
Annual gross income of Husband : €52k (from DB Pension)

Monthly take-home pay: €7.3k (after tax)

Type of employment
Employee (wife). Employer type of Wife : private company.
Retired (husband)

In general we save a little.


Summary of Assets and Liabilities
Family home value: €800k
Mortgage on family home: Nil
Net equity: €800k

Cash: €42k (includes savings for kids college, car replacement etc)
Defined Contribution pension fund WIFE (me): €470k
Defined Contribution pension fund HUSBAND: €54k (This is an extra pot in addition to husband's DB scheme )
Company shares : €9k
Buy to Let Property value: none

Total net assets: €1.375m


Family home mortgage information
Mortgage has been paid off

Other borrowings – car loans/personal loans etc
None

Do you pay off your full credit card balance each month? Yes


Pension information

Value of pension fund: €524k (combination of wife and husband pension funds as stated above)


Buy to let properties
None

Other savings and investments:
None

Other information which might be relevant

Life insurance: €790k (cover under a number of different policies)

Inheritance due to husband of ½ of a family home in north Dublin suburbs.
Estimate for value of house is €450k. Inheritance expected in 2025.
Inheritance Tax bill estimate is €68k.

Wife is due to receive a redundancy package from current employer in early 2025.
– value €60k after tax. This is calculated with the option of retaining the right of taking tax free lump sum from pension
The intention is that I will find other employment up to age 60+.

Wife is hopeful of qualifying for the UK state pension (class 2), applied for. Not confirmed yet

What specific question do you have or what issues are of concern to you?

Wife’s Pension Pot: my total pension pot is made up of a number of personal pension schemes, a PRSA, one past company DC pension and my current company DC pension. I am considering transferring my past pensions into the PRSA and then putting the PRSA into my current company DC pension. This is so I can avail of a 25% tax free lump sum of the total as opposed to the salary in service tax free lump sum. If I am to do this I need start very soon as it’s needs to be done before I leave my current employer early next year. Is this a good idea?


Wife’s Priority: enabling the 2 kids to be able to buy their own house in Dublin in the future. Fear is that with the current housing situation, they will never be able to do this. (she has put up posts previously about the possibility of buying the Inheritance house mentioned above)


Husband’s Priority: safely invest the expected inheritance and redundancy monies as a long term future inheritance for our 2 kids. But also have access to some of these funds in case of unforeseen income shortages for us in the future or we run into an unexpected heavy financial burden.

Wife tends to be a risk taker, husband tends to be risk averse.

Any advice please?
 
Last edited:
Since writing the above, I have read elesewhere on this site about getting the full 25% tax relief on the pension lump sum, AND choosing Option B re redundancy (waivering the right to tax free lump sum). Interested to know more !
 
Hi figrolls,

Do your children have a reasonably good chance of good incomes over their lives? Are the training for a well paid profession? Will they likely go off and see the world for the next 10 years before they settle down?
 
figrolls said:
Annual gross income of spouse/partner: €52k (from DB Pension)
Click to expand...

figrolls said:
Defined Contribution pension fund wife (me): €470k
Defined Contribution pension fund husband: €54k
Click to expand...

figrolls said:
Wife’s Priority: enabling the 2 kids to be able to buy their own house in Dublin in the future. Fear is that with the current housing situation, they will never be able to do this. (she has put up posts previously about the possibility of buying the Inheritance house mentioned above)
Click to expand...


This is all very confusing and has probably put people off replying.

Who is posting here? Are you the husband or the wife?

It would be much easier if you said "Your age 56; Wife's age 63" if that is the situation.


But the main confusion is the pension situation.

Someone is getting €52k from a Defined Benefit pension.

Do they also have a Defined Contribution Pension Fund worth €54k?

Are they retired? Can the person who is still working contribute to a pension fund? If so, that would probably be the best use of spare cash.
 
Since writing the above, I have read elesewhere on this site about getting the full 25% tax relief on the pension lump sum, AND choosing Option B re redundancy (waivering the right to tax free lump sum). Interested to know more !
3CC said:
Hi figrolls,

Do your children have a reasonably good chance of good incomes over their lives? Are the training for a well paid profession? Will they likely go off and see the world for the next 10 years before they settle down?
Click to expand...
Hi 3CC, One of them them does, one of them doesnt . (One in hosptality, one in sciences)
 
Brendan Burgess said:
This is all very confusing and has probably put people off replying.

Who is posting here? Are you the husband or the wife?

It would be much easier if you said "Your age 56; Wife's age 63" if that is the situation.


But the main confusion is the pension situation.

Someone is getting €52k from a Defined Benefit pension.

Do they also have a Defined Contribution Pension Fund worth €54k?

Are they retired? Can the person who is still working contribute to a pension fund? If so, that would probably be the best use of spare cash.
Click to expand...
Thanks Brendan for the feedback. Wife is posting question (mentioned at the top - but I've edited post to make it a bit clearer ). Husband is gettng 52K annually from a DB scheme. But he also has a separate pension pot of DC contribution. This has not been drawn down yet, at the minute , this money is sitting in the company pension scheme. This is worth €54K. Also, he has already availed of a tax free lump sum when when retired. Me (the wife ) is still working. I am being made redundant spring next year. My intention is to get another job .
I am currently in a company pension scheme, and I have other pensions as mentioned in original post (includng a PRSA)
 
figrolls said:
Since writing the above, I have read elesewhere on this site about getting the full 25% tax relief on the pension lump sum, AND choosing Option B re redundancy (waivering the right to tax free lump sum). Interested to know more !

Hi 3CC, One of them them does, one of them doesnt . (One in hosptality, one in sciences)
Click to expand...
Sorry @3CC , I didn't answer your other question. I expect them to travel and live abroad for a few years. I've no idea if they woud be for more then say 2 years though .... but I wouldnt be suprised if they do.
 
Thanks for your replies @figrolls

figrolls said:
Wife’s Pension Pot: my total pension pot is made up of a number of personal pension schemes, a PRSA, one past company DC pension and my current company DC pension. I am considering transferring my past pensions into the PRSA and then putting the PRSA into my current company DC pension. This is so I can avail of a 25% tax free lump sum of the total as opposed to the salary in service tax free lump sum. If I am to do this I need start very soon as it’s needs to be done before I leave my current employer early next year. Is this a good idea?
Click to expand...
On the question of combining all your pensions into one, there are others here on AAM who know more about that than me. But it can be useful to have a number of different pensions in that you can then retire them at different times if that suits you. If all your pension is in a single scheme, you have to take the entire lump sum in one go and imputed distributions apply to the whole amount from then on (based on your age). More than one scheme can give you more options.

figrolls said:
Wife’s Priority: enabling the 2 kids to be able to buy their own house in Dublin in the future. Fear is that with the current housing situation, they will never be able to do this. (she has put up posts previously about the possibility of buying the Inheritance house mentioned above)


Husband’s Priority: safely invest the expected inheritance and redundancy monies as a long term future inheritance for our 2 kids. But also have access to some of these funds in case of unforeseen income shortages for us in the future or we run into an unexpected heavy financial burden.

Wife tends to be a risk taker, husband tends to be risk averse.

Any advice please?
Click to expand...
For this part of the question, for me the options break down like this.

1) Buy the inheritance property, rent it out until one the kids needs a house and then gift it to that child with a view to maybe the other child inheriting your own home in time.
  • Risks:
    • Almost all your wealth is in Irish property. You are very exposed to a loss of wealth if property prices crash or even stagnate over a prolonged period.
    • You are buying after a period of strong growth - often not a good time to invest.
    • You will have 2 houses to bequeath to your children but one is worth twice what the other is - that might be a problem in the future.
    • One or both of your children might meet their future spouse abroad and not return to Ireland.
    • You might need the money yourselves in retirement and houses are very slow to turn back into cash.
    • Your kids may prefer to live outside of Dublin in the future.
    • You can't divide up your wealth equally between your kids to maximise the CAT tax allowances on your death if all your wealth is in houses. The child who gets your own home might be hit with a big tax bill while the other could have spare CAT allowance unused.
  • Benefits:
    • Both your children will be in line to inherit a house in due course, if the need it.
2) Invest the proceeds from the inheritance.
  • Risks: Not sure really.
  • Benefits:
    • If you can invest via your pension, this is very tax efficient.
    • Your investments can be much more diversified.
    • You can access cash quickly if you (or your children) need it (but you have to wait until after retirement if in a pension).
    • Your kids get to decide where they will live in the long term.
    • You can more easily split your estate in your will with less chances of a falling out.
 
Last edited:
Thank you @3CC for you reply.

The more I read feedback here, I am going off the idea of buying the inheritance property (but not totally) . My husband was never keen.

I am wondering how to max the pension ... I can put in 35% of my salary into the company scheme now, which in terms of money that's about 20K . I'll be made redundant next spring, so I'm not sure what options I'll have after that . If I dont get a job, or if I get a position without a pension scheme etc

Apart from maxing out pension, It seems it's investing / shares is the other option .
We have pretty much no knowlwdge/ experience of this.
 
So is this correct? - even after you are made redundant in early 2025, you will have as a couple:
  • Income 52K
  • Assets
    • PPR 800k
    • Cash 42k
    • Shares 9k
    • DC Pension 1- 470k
    • DC Pension 2 - 54k
    • Inheritance 225k
    • Redundancy 60k
    • 1 x UK State Pension TBC
    • 2 Irish State Pensions
    • Imputed value of husband's DB scheme - maybe €1m or more if the payment is escalating
  • Liabilities
    • CAT 68k
    • Kids college fund
    • Car replacement
Sounds like you are very well set up. Your husband already has a good pension and presumably will get the Irish state pension in time also. You have a healthy DC pension fund plus presumably the Irish state pension and possibly the UK state pension.

There is a good chance that you will not be able to spend all your income during retirement but I guess that depends on your lifestyle.

If you both died tomorrow, the value of your estate would be in the region of €1.6m. I know that this will decrease during your retirement but maybe not that much if you are not spending all your income. Assuming you leave everything to both your kids, there could be a substantial CAT bill to pay.

Here are some things that I would consider in your shoes.
  1. Keep enough cash aside for foreseeable expenses in the next 3-5 years and then some for emergencies.
  2. Max out your pension contributions.
  3. Make sure all your DC pensions are invested in low cost passive index tracking equity based funds, as far as possible.
  4. You could consider early retirement if that is your thing.,
  5. Work out what you will spend in retirement - this is a very useful thing to know for planning purposes.
  6. Once you are certain that you have enough for your own retirement, consider gifting 3k per year to your kids to reduce their future CAT bill.
  7. Consider keeping your various pensions separate so that you can retire some later with a view to maximising returns. It also means that you will get a number of modest lump sums - one from each pension as you retire them. This is probably more useful than one large sum sum.
  8. Even after you do all of the above, you could have quite of bit of cash in the bank from the inheritance and redundancy. You have 2 choices for this.
    1. Learn about investing and once you are happy invest this for the long term. Take your time with this. Waiting a year to educate yourself is well worth it.
    2. If you just don't want to bother with all that, just put this on deposit with a reputable bank with a good interest rate. Make sure to keep the amount below the 100k Deposit Guarantee Scheme limit per bank per person. This is not quite as good as investing but given that you will have all your pensions in equities as above, and the portion that this represents of your overall wealth, this is probably not a major issue for you. You could also use your cash reserves first when you retire and leave your pensions invested for longer for better returns.
Hope this helps.
 
Thanks so much again @3CC for taking the time. That helps, a lot .

Yes we will both get state pension

Imputed value of husband's DB scheme - maybe €1m or more if the payment is escalatin - does this mean what it would cost to buy a 52K pension ? Tried googling it but I'm not certain .

Good to see the advice about taking time to learn about investing as I feel we are under pressure a bit to decide all before I'm made redundant (mainly because I had been focusing on buying out the inheritance house and possibly part funding it via mortgage whilst still employed ).
I'm a bit paniky about the housing situation for kids futures - just worrying about it too much I guess. Maybe I shousld stop reading the news! Being a Mammy I see them emigrating becasue of it. Likes lots of folks, I remember back to when we started off and we were so lucky to get some help from husband's parents and I'm aware its much worse for young people now. ..... anyway, there's lots of discussions elsewhere on AAM about theat I know, so enough of that.



THANK YOU
 
figrolls said:
Imputed value of husband's DB scheme - maybe €1m or more if the payment is escalatin - does this mean what it would cost to buy a 52K pension ? Tried googling it but I'm not certain .
Click to expand...
Correct - I used this website. https://www.pensionplanetinteractive.ie/ppi/public/pensionChoicePersonalDetails.action
If you put in €1m, and age 63, you get less than 53k so that's what it would cost to buy an annuity of the same value.

figrolls said:
Being a Mammy I see them emigrating because of it
Click to expand...
I know - there is a big emotional aspect to owning a house. Don't rush into anything. Take your time. And don't worry, when the time comes you and your husband will be in a strong financial position to help your kids with whatever they decide.
 
figrolls said:
Cash: €42k (includes savings for kids college, car replacement etc)
Click to expand...

figrolls said:
Company shares : €9k
Click to expand...

figrolls said:
Estimate for value of house is €450k. Inheritance expected in 2025.
Inheritance Tax bill estimate is €68k.
Click to expand...

figrolls said:
Wife is due to receive a redundancy package from current employer in early 2025.
– value €60k after tax.
Click to expand...

You need €225k to buy the house and €68k to pay the CAT - a total of €293k
You have or will have €110k in cash and shares
So you will need to borrow €183k

Not sure you will find it easy to get a mortgage for that. If you did, it would be for only 10 years or maybe 15. €183k for 15 years at 5% would be about €1,500 a month. You will probably get about €3k a month rent, or €1,500 after tax.

And your children might not choose that house.

So sell the house. Max your pensions. and you will have plenty of cash available to help your children get their foot on the ladder that they choose.
 
Brendan Burgess said:
You need €225k to buy the house and €68k to pay the CAT - a total of €293k
You have or will have €110k in cash and shares
So you will need to borrow €183k

Not sure you will find it easy to get a mortgage for that. If you did, it would be for only 10 years or maybe 15. €183k for 15 years at 5% would be about €1,500 a month. You will probably get about €3k a month rent, or €1,500 after tax.

And your children might not choose that house.

So sell the house. Max your pensions. and you will have plenty of cash available to help your children get their foot on the ladder that they choose.
Click to expand...
Thanks @Brendan Burgess

Instead of that size mortgage, one idea was upping the tax free lump sum that I could avail of when I finish up next spring .
To do this : I would have combined them all first into the company/ pension scheme (as in the pension scheme of the company I am currently employed by).
To Illustrate
Pension 1 (P1) is a personal pension
P2 is a personal pension
P3 is a PRSA
P4 is a Company pension of a company I used to work for
P5 is the Pension I am currently investing in - which is the pension scheme of the company I currently work for (due to be made redundant from here)

The thinking was
Put P1 and P2 (and possibly P4, lets assume for now I can do this ) into P3 (PRSA).
Then transfer P3 (PRSA) to P5. So P5 now has all the €470K
Then, I would be able to take a 25% tax free lump sum of P5 before I get made redundant.
The cash free lump sum would be €470 x 25% - about €110K.

The original intention of putting his towards the purchase price of the house. (An advisor who knows pensions had suggested this to me)


This is what this text was about

Wife’s Pension Pot: my total pension pot is made up of a number of personal pension schemes, a PRSA, one past company DC pension and my current company DC pension. I am considering transferring my past pensions into the PRSA and then putting the PRSA into my current company DC pension. This is so I can avail of a 25% tax free lump sum of the total as opposed to the salary in service tax free lump sum. If I am to do this I need start very soon as it’s needs to be done before I leave my current employer early next year. Is this a good idea?

(The value of my current pension scheme is €70K btw )


Sorry I see my origianl post is even more confusing !!!
 
That is way above my paygrade.

But the general principle should be that you have liquid resources (shares or cash) available to help your sons when they want to buy a house.

If you own a house that they don't want because it's in the wrong place or too big, then it's no help to them and it might take some time to get rid of the tenants and sell it.

But if you have €200k in shares, you can cash some or all of them to help your son.

Brendan
 
Brendan Burgess said:
That is way above my paygrade.

But the general principle should be that you have liquid resources (shares or cash) available to help your sons when they want to buy a house.

If you own a house that they don't want because it's in the wrong place or too big, then it's no help to them and it might take some time to get rid of the tenants and sell it.

But if you have €200k in shares, you can cash some or all of them to help your son.

Brendan
Click to expand...

Thanks so much Brendan for taking the time to advise . It’s very much appreciated


You’ve all made me see the positives regards investing (even tho it’s a bit scary!) And that we need to research investing .
Also re maxing pension

THANK YOU
 
figrolls said:
Pension 1 (P1) is a personal pension
P2 is a personal pension
P3 is a PRSA
P4 is a Company pension of a company I used to work for
P5 is the Pension I am currently investing in - which is the pension scheme of the company I currently work for (due to be made redundant from here)

The thinking was
Put P1 and P2 (and possibly P4, lets assume for now I can do this ) into P3 (PRSA).
Then transfer P3 (PRSA) to P5. So P5 now has all the €470K
Then, I would be able to take a 25% tax free lump sum of P5 before I get made redundant.
The cash free lump sum would be €470 x 25% - about €110K.
Click to expand...
That's quite complicated and you will be loosing the opportunity of a lot of tax free growth within the pension wrapper only to buy a house which has no tax free status.

figrolls said:
(An advisor who knows pensions had suggested this to me)
Click to expand...
Is this an independent advisor who is being paid a fixed fee for advice or is it someone who will be paid a commission for the work in rearranging the pensions. You might get better advice if it is independent.
 
You must log in or register to reply here.
Back
Top