Prsa Trivial Pension Tax Question

M

Michael Herman

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Hi Guys,
my wife has a small Prsa of ca 30000 Euro which comes to maturity. I was wondering if anybody could tell me if she take the Trivial Pension option how is the remainder of ca Euro 23000 after the lump sum taxed?
 
It is taxed under the PAYE system so if she has any other income in the year of claim, she could be paying income tax at 40%, PRSI at 4% if she is under 66 and USC at up to 8%.

Steven
[broken link removed]
 
Hi guys, my wife was trying to avail of this Trivial Pension Option. We filled in the form with the Ark Life Advisor and sent it off. We now got an answer from Ark life saying: Based on your HSE Scheme and the current value of your plan you would be outside of the limits to be eligible for this option.
Could anybody shed some light on this? We were actually hoping not to go down that road of Annuity , ARF, AMRF. This options seem like bad investments. But I am not an expert really.
 
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trivial pension option applies in two scenarios. The first one doesn't apply as the current PRSA is too big. The other scenario is when total pension benefits are less than 30k. However, you have another benefit which rules out this scenario as well. Unfortunately therefore you only have ARF/AMRF and annuity option here.

However if her DB (it is a DB?) pension is greater than 12,700 per annum at retirement, she could just take the lump sum and drawdown the balance of the PRSA as income? Is this not the same result as the trivial pension anyway?

A couple of other queries which maybe useful:
Is this PRSA an AVC linked to the HSE scheme?
Does she have an option to buy more years for the HSE scheme?
Does she need access to the funds for an immediate need? In the absence of this the best place for the funds would probably be within the current structure.
 
Thank you very much for the reply.
1. This PRSA is not linked to the HSE scheme.
2. I think she would be able to buy back years.

I think we now have to look at ARF or AMRF. Annuity would not be the right thing.
Question: How is this Euro 12700 Rule handled? This decides whether she can take an ARF or ARFM correct?
She is 60 now and would work up to 65 before retirement. As she worked part time for the last 25 years the Company Pension is about 300 Euro per month with a lump sum of 20000 on retirment. There also is a pension from another EU country from her 66 birthday of ca 500 Euro a month. And then obviously the irish State Pension whatever that is. Would she qualify for the ARF option?
 
An AMRF is required unless you are in receipt of 12,700 per annum of guaranteed pension income. The key part is that she has to be in receipt of the income. From what you have outlined above it looks like that once the state pension is paid she would probably have reached this threshold and then any AMRF's will convert to ARF's. It would be no harm to check what her state pension entitlements are to ensure this is the case.

Is there an immediate need to retire the PRSA at age 60? She can hold off till 75 to do so.
 
Hi Fergal19, thanks for that.
I understand that if she wants the ARF option she has to be in receipt of Pension Income of min.12700 which she hasn't at the moment because she is still working.
So only option is Annuity ( the rates are very low I think) or AMRF where she can draw 4% yearly.
I hope I got it correct?
You asked if she needs access to the funds for an immediate need.
We were so focused on that trival pension option, we had already looked at new cars.... -:)
 
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