Tax free lump sum calculation

I was wondering how Revenue calculate lump sum entitlement with early retirement. I am 58 and have 13 years service with the company on a salary of €45,500, how much roughly should I expect ? The pot is €153,000.

Hi Grueler

I take it that your in a DC plan. There are different methods for calculating tax free lump sums (one of those needless complications of modern life). So in your case, I believe taking 25% of the fund will work out best, i.e. approx €38k

Thanks elacsaplau for your reply, does the 25% rule still apply even if retire early or is there more to it ?

Yep - 25% is allowed upon early retirement.

(If you were to base your tax free lump sum on income and service, i.e. the traditional approach - then early retirement influences the lump sum available. You don't have to worry about such technicalities!)

If you take 25%, you must invest in an ARF and manage the fund yourself. If you do not have a guaranteed income of €12,700, you must

invest €63,500 of the remainder in an AMRF. You can only access the growth of this fund until age 75 when you can also access the capital. Or

You can purchase an annuity with the €63,500.

That will leave you with €51,250 to invest in an ARF.


Steven
www.bluewaterfp.ie