PRSA

M

Minnie

Registered User
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Hi
Is it possible / legal for me to withdraw all monies in my PRSA at age 60 or do I have to take out an annuity or ARF. I would not have an income of €12,700 at that point but would have monies (besides my PRSA) available to me to allow this until age 67 when the Contributory Pension would start.
 
If this is your only pension and the value after lump sum is less than €20,000, you can take the balance as a lump sum and pay tax under PAYE. The €12,700 requirement must be made up of pension income so other money you may have to live off is not taken into account.

If you are over €20,000, the first €63,500 must be used to invest in an AMRF or purchase an annuity. Anything over the €63,500 can be cashed and taxed under PAYE.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Hi Steven,
Thank you for your reply.
Why do we have to allow the Insurance Companies dictate the terms of withdrawl, is it not our money and have we not paid over enough in management fees over the lifetime of our investments. In other words can I demand the redemption value my pension pot at age 60.
Has this ever been challenged before.
 
No, you can't demand. The rules are dictated by Revenue / tax legislation, not the pension company. So feel free if you want to challenge
 
Hi RedOnion,
Thanks for your reply.
So is there anyone out there besides myself that would like to challenge the current system and allow free will with regards to our pension pots when we reach retirement age.
 
Minnie said:
Hi RedOnion,
Thanks for your reply.
So is there anyone out there besides myself that would like to challenge the current system and allow free will with regards to our pension pots when we reach retirement age.
Click to expand...

They got pension freedom in UK recently maybe it will come in here as well. They usually follow the UK, sure they talking about auto enrolment here now something that already commenced in the UK few years back too.
 
Without wishing to state the obvious, you invested in a “pension” structure designed to give you a pension when you retire. You got tax relief along the way on that basis.
You have certain flexibility. You can take 25% of the fund tax free. The balance is supposed to provide an income in retirement. Other than the €63,500 “safety net “ (if you don’t have a pension income €12,800) you can take all the balance as a taxable income in one year.
So I fail to see you complaint.
 
The AMRF requirement is a joke and I think it should be gotten rid of. It punishes people who have small pension pots in that they can only access 4% of it a year. Meanwhile, it's a good shelter for those with large pension pots, so it isn't subject to imputed distribution each year.

But the AMRF requirement was introduced by Charlie McCreevy and enforced by the Revenue. Insurance companies are only following the rules.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Agreed Steven. The AMRF is little more than a nuisance, particularly for those with small funds. Originally intended as a safety net, it is of no real relevance in terms of pension income. But as you know, it was proposed to increase the €63,500 to €120,000 some years back but that was not proceeded with.
 
Not sure the AMRF is the problem. In theory it’s a good idea so that we don’t blow all our retirement fund before we reach 75. The problem is the size of the fund it relates to. If anyone has a total fund of less than €84,666 approx it’s problematic as the balance after retirement lump sum is paid out goes straight to AMRF.

However, if that person has only that amount built up anyway, their expectation has to be managed and they need to be made aware that this fund isn’t the pot of gold that they may think it is.

Also, prevailing annuity rates are currently low. If they rose they can always change from AMRF to Annuity but again it’s not going to provide a huge income in retirement regardless.
Conan said:
Agreed Steven. The AMRF is little more than a nuisance, particularly for those with small funds. Originally intended as a safety net, it is of no real relevance in terms of pension income. But as you know, it was proposed to increase the €63,500 to €120,000 some years back but that was not proceeded with.
Click to expand...

It did increase to 119,800 and was then reversed back to 63,500 some years later.
 
Thank you all for your informative replies.
One of the biggest issues at the moment are the current annuity rates which are a disaster, also no notice is taken of monies that I may have other than pension income - Why? It is discriminatory towards those of us with smaller pension pots as we are forced into a vehicle that is not currently providing a good return for our lifetime while those with bigger pension pots are afforded more choice. The safety net of €63,500 is only suiting the Pension Provider. Because the annuity rates are so low the current legislation needs to be updated/reviewed so as not to punish/discriminate against those of us who have less.
Delfio, I will take a look at the UK to see the model they have introduced there.
 
If you are over €20,000, the first €63,500 must be used to invest in an AMRF or purchase an annuity. Anything over the €63,500 can be cashed and taxed under PAYE.
Hi Steven re your comment above, can you tell me if I pay income tax on the amount invested or on the value of the fund at withdrawl, in other words if I have been lucky enough to have had a good return on my pension, will I pay income tax on gain or just my contributions.
Thank you
 
The amount invested in the ARF or AMRF transfers over from the pension fund with no tax consequences. You don’t pay tax on any investment growth within the ARF/ AMRF but you pay income tax (potentially) on any drawdown.
The drawdown in the equivalent of your pension. So depending on the amount of drawdown you may have an income tax liability. But remember if your total income is below the income tax threshold (€18,000 for a single person and €36,000 for a couple) then there may be no income tax liability.
 
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