PRSA question

R

Red Helmet

New Member
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6
HI,
I am 66 on the point of retirement. I have several pension funds one of which is a PRSA worth 100k approx. I believe( maybe wrongly) that I can continue this prsa -until max age 75. I can take the tax free lump sum from other funds. I was wondering does the compulsory 4% distribution apply to this or not until the PRSA is wound up and also is the PRSA in this situation considered part of the total sum allowed (2m)
Thanks
 
Red Helmet said:
I believe( maybe wrongly) that I can continue this prsa -until max age 75
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You're not wrong. See section 24.4 here:


Red Helmet said:
I was wondering does the compulsory 4% distribution apply to this or not
Click to expand...

It does not. Imputed distribution applies to ARFs and vested PRSAs. You are not planning to vest this PRSA until the maximum age allowed and so the imputed distribution will not come into play until that time. See here:


Red Helmet said:
is the PRSA in this situation considered part of the total sum allowed (2m)
Click to expand...

The Standard Fund Threshold (SFT) includes PRSAs, personal pensions, Buy Out Bonds, DC schemes, capitalised value of DB schemes, pension lump sums etc. See here:


When the capital value of a pension benefit, either on its own or when aggregated with a previous benefit taken since 7 December 2005, exceeds the SFT, a chargeable excess arises.

If for instance you crystallise your other (non PRSA) pension benefits and these amount to €1.95m then excess tax will not hit as none of these have yet taken you above the €2m level. When you crystallise the €100k PRSA, the administrator will add the €100k to the €1.95m and see that you have taken €2,050,000 of pension benefits and levy a chargeable excess tax of 40% on the amount over €2m. Tax will be due of €20,000. However, there is a tax credit against this for any tax paid on lump sums at the standard rate. Up to €300k of pension lump sum (above the tax free €200k) is taxable at 20% and so you have a potential credit of €60,000 (€300k x 20%) against the excess tax on balances above €2m. Therefore, the effective Standard Fund Threshold is €2,150,000 (i.e. €2,000,000 + [ €60,000 / 0.40 ] ).

If the €2m/€2.15m threshold is a factor for you, make sure to take advice in relation to this.
 
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