interest rates at retirement age

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alicat

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I am heartily sorry if this is a dumb question but if I am saving 20% on my pension deductions at the moment, will I be taxed at 20% on my lump sum on retirement or will I be taxed at the prevailing rate in 2050?
 
You can take up to 25% of your pension fund as a tax free lump sum at retirement. You may then be able to either roll some or all of the remainder into a further investment (ARF or AMRF - depending on circumstances) and/or buy an annuity which pays a retirement income. Any retirement income will be assessable for income tax as normal. This includes state (contributory and non-contributory) pension payments as well as private (personal, PRSA or occupational) pension payments if I'm not mistaken as well as any other income that you may have (e.g. part time work etc.). If your reirement income was under the relevant income tax exemption thresholds at the time then you would pay not tax. At current rates if you were not exempt then you would pay 20%/41% gross (with tax credits deducted to give net tax) on income depending on what level of income you were receiving. I think that there is also marginal relief in certain circumstances where you are just marginally pushed into the high rate tax band.
 
To be clear, under current rules you can only take 25% of the pension fund as a Tax Free lump sum on retirement if you are either Self Employed or a 5% plus shareholding Director.
If you are an employee (not 5% Director) then you maximum Tax Free lump sum is 150% of your Final Salary.

Under current rules the Tax Free lump sum is tax free.
All other income received will be taxed as income, be that occupational pension, State Pension etc.
 
Conan said:
To be clear, under current rules you can only take 25% of the pension fund as a Tax Free lump sum on retirement if you are either Self Employed or a 5% plus shareholding Director.
If you are an employee (not 5% Director) then you maximum Tax Free lump sum is 150% of your Final Salary.
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Eh?! What about this (personal pension):
Approved Minimum Retirement Fund

 You may take up to 25% of the fund as a lump sum (tax-free). Then you must set aside at least 63,486.90 euro of the fund and place it in an Approved Minimum Retirement Fund (AMRF). This fund may not be drawn down to less than 63,486.90 euro until you reach 75. This obligation to invest in an AMRF will not be imposed if you have a guaranteed pension or income for life from a state pension, annuity or occupational pension of at least 12,697.38 euro per annum (this is called the minimum income requirement).
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and (I'm pretty sure) similar info on the Pensions Board website which suggests that the 25% lump sum is not only for the classes of individual that you mention (but I can't check because their site seems to be dog slow at the moment)?
 
To clarify Conan's post above, the limit of 150% final salary as a tax-free lump sum at retirement applies only to employees with ordinary contributions into Occupational Pension Schemes. An employee who is contributing to a PRSA or a Personal Pension can withdraw 25% of the accumulated fund.
 
OK - I'm confused now but this statement:
Conan said:
To be clear, under current rules you can only take 25% of the pension fund as a Tax Free lump sum on retirement if you are either Self Employed or a 5% plus shareholding Director.
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is surely simply incorrect?

I don't understand why the issue of being self employed or shareholding director are being introduced here for no obvious reason and certainly not based on anything in the original post/query?
 
ClubMan,
Apologies for any confusion, but I mentioned the Self Employed/5% Director issue because the first line of your reply said "You can take up to 25% of your pension fund as a tax free lump sum on retirement".
The 25% does not apply to employees in occupational pension plans (where the 150% of Salary max applies). It only applies to Personal Pensions, 5% Director Plans (and yes PRSAs). The Citizens Information site only refers to Personal Pensions (mainly effected by those who are self employed - Schedule D Case 1 or Case 2 income).
Admittadly our original poster did not state whether he is an employee, a 5% Director or self employed. But it is incorrect to state that the tax free lump sum is automatically 25% irrespective of his status.
 
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