Pension drawdown strategy

J

jim

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Hi,

Is it possible to access my occupational pension at 55 and draw it down in such a way that the funds get used up by the time i reach state pension age?

Prob seems a strange question, but i think this is what i would like to do.

If my pension pot at 55 is say €500k what type of lump sum and what type of annual income could i expect for the 13 years until 68, assuming that will be the age that state pension kicks in? Is it even possible to calculate?

Thank you
 
jim said:
Prob seems a strange question, but i think this is what i would like to do.
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It's a very unusual thing to want to do, unless you've very specific circumstances. Have you really thought about why you might like to do this?

Make sure you get advice in this, both financial and tax. You'll end up paying high tax drawing it down in a short period.

Once you've left the employment that the pension relates to, one option is you could transfer 63,500 to an AMRF, and the balance to an ARF, and then drawdown the ARF whatever way you like.
 
I’m in the same boat. By 55, I’ll have a decent DB pension accrued (payable at 65) and also a decent lump in an AVC (10 x salary).

I’m thinking if I leave work at 55, move my AVC out and then ‘retire’ with the AVC to maintain my lifestyle for 10 years before the DB kicks in. State pension will then be another top up.

Does this sound reasonable? How will the tax free lump sum work at 55?
 
Thanks Redonion. Basically i hope to have the full irish and the full uk state pension from my late 60s and those alone will be adequate for me as well as a rental property that i will hopefully still have.

Therefore, i hope to use my occupational pension from 55 until state pension age as well as rental income and possible small bit of consultancy work. That would be more than adequate for me. I will also have my mortgage fully paid off by 55.
I would certainly get advice before doing this but wanted to sense check it here as well. I will read up on arf and amrfs.

An online calculator that could show me projections re drawing down 500k from 55 to 68 would be ideal.
 
jim said:
i hope to have the full irish and the full uk state pension from my late 60s
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Are you sure that’s possible?

I’m pretty sure you need 35 years of contributions to qualify for the full State pension in the UK and bear in mind that we are due to move to a total contribution approach here in the coming years.
 
If we move to a “total contribution approach” in Ireland (as is proposed) then you will need 40 years of contributions to qualify for a full State Pension (whether at 66, 67 or 68). If less than 40 years, it would be a proportionally reduced pension. Cannot see therefore that the OP could qualify for a full pension both in the U.K. and in Ireland.
 
Thomas1 said:
I’m in the same boat. By 55, I’ll have a decent DB pension accrued (payable at 65) and also a decent lump in an AVC (10 x salary).

I’m thinking if I leave work at 55, move my AVC out and then ‘retire’ with the AVC to maintain my lifestyle for 10 years before the DB kicks in. State pension will then be another top up.

Does this sound reasonable? How will the tax free lump sum work at 55?
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If your AVC is linked to your main DB scheme, then you must access both at the same time. You cannot access your AVC separately whilst not drawing down your DB pension and lump sum.
 
Conan said:
If your AVC is linked to your main DB scheme, then you must access both at the same time. You cannot access your AVC separately whilst not drawing down your DB pension and lump sum.
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If I leave the company though, can I not move my own AVC contributions to a private PRSA or some other product?
 
Thanks Sarenco and Conan for your replies.
Im buying back my gap years in UK at the cheaper class 2 rate. Havent done it yet but am planning to which, as i understand it, will entitle me to full uk pension.

At 60 yrs old ill have about 40 yrs contributions. At 55 if i retire then can i somehow continuee to make prsi contributions to ensure full pension? Like through my pension income?
 
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jim said:
Im buying back my gap years in UK at the cheaper class 2 rate.
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How many years of contributions do you have in the UK? It can’t be too many if you will have 40 years of contributions in Ireland by 60.

My understanding is that you can normally only go back six years to make top-up contributions in the UK.
 
jim said:
At 60 yrs old ill have about 40 yrs contributions. At 55 if i retire then can i somehow continuee to make prsi contributions to ensure full pension? Like through my pension income?
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one currently pays 4% prsi on the arf drawdown that covers state pension so under your scenario of takng a drawdown each year that would cover it from age 55 to 68.
 
Yeah it would be touch and go.
I have 3 yrs contributions in uk and i have received confirmation that i qualify for class 2 contributions to bridge the gap. So i have the opportunity to obtain the full uk state pension.

I have been paying prsi since i was 15 with some gaps here and there so at 60 i might be close to the 40 years. Is it possible to somehow make up any shortfall in that regard? For example, can i pay prsi on my pension or other income so as to protect entitlement to full irish state pension? Actually i think MTK had mentioned it above, thank you.
So if im not mistake i will probably have the opportunity to obtain full pension in both jurisdictions and if this is the case then i would want to run down my occupational pension from as early as possible (i think its 55) to state pension age. I would seek tax advice re this when the time comes. Is there anyway to project the kind of annual pension i might get from the occupational pension if doing it this way? I would project a fund of about 500k by then.
 
jim said:
I have 3 yrs contributions in uk and i have received confirmation that i qualify for class 2 contributions to bridge the gap. So i have the opportunity to obtain the full uk state pension.
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So you would be buying 32 years worth of national insurance contributions - is that right?

I’m surprised that’s possible at any kind of reasonable cost.
 
Yes thats my understand Sarenco and at class 2 rate i think its about £3 per week so 32 years would be about £5k which is obviously an excellent investment.
 
Is it possible to draw down occupational pension across a, for example, 13 year period? I dont think i want it to be an annuity for life which im assuming would result in a lower annual pension. Id prefer for it to be a defined amount per year for a set number of yrs resulting in a hopefully higher annual pension. I think an ARF would provide this?
Anyway its years away but just want to know what my options are.
 
jim said:
Is it possible to draw down occupational pension across a, for example, 13 year period? I dont think i want it to be an annuity for life which im assuming would result in a lower annual pension. Id prefer for it to be a defined amount per year for a set number of yrs resulting in a hopefully higher annual pension. I think an ARF would provide this?
Anyway its years away but just want to know what my options are.
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Yes, it is. You have to satisfy the guaranteed income requirement, so lets assume the first €63,500 is put into an AMRF. That leaves you with €436,500. Assuming growth of 4% per annum, you can draw down €43,712 per annum for 13 years. You will have withdrawn all the money from the ARF at that point.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
The Tax Free lump sum needs to be considered as well, which depending on service length etc, would reduce the ARF available for drawdown considerably. And as, has been said, high annual drawdown amounts = high taxes.
There is also an arguement, for keeping the annual drawdown amounts lower, and supplement this with the tax free amount, over time. This also allows for the ARF continues to grow more over time. The cumulative effect, of growth over time can be significant.
 
I think there are 2 factors you need to consider.

1. What would happen if the rules change and the state pension in either country is reduced/altered or if UK and Ireland close this double state pension entitlement.
2 How will you fare in a market crash over those 13 years

If you are happy that the combined annual payment of 2 state pensions will be enough to sustain yourself (rent aside certeris parabus) then this would presumably be all you need to match as a drawdown from your ARF. So around €20k per year drawdown from your 436K This could help alleviate both points I guess and double the lifetime mentioned by Stephen
 
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