Key Post What to do with a pension fund from a previous employment

Many thanks again Liam, very clear

It seems a no-brainer that I should stay in the pension fund till aged 60, then transfer to an ARF assuming I meet the guaranteed income requirement, which all being well I should. Then, draw down from that ARF each year to minimise the tax hit.
Two further matters arising - is there NO tax levied on the move from DC fund to ARF? and
what would be a working example? - say I move the entirety of the fund to an ARF (300,000 for sake of argument) how much tax would a 5% withdrawal (15k) p.a. attract? Am I over-optimistic in assuming a 5% level of growth in the ARF each year - in other words, is such an annual 5% withdrawal likely to erode my initial capital lump sum?
 
JackD said:
Two further matters arising - is there NO tax levied on the move from DC fund to ARF?
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No tax on the transfer itself. It's when you start withdrawing money from the ARF that tax arises.

JackD said:
...say I move the entirety of the fund to an ARF (300,000 for sake of argument) how much tax would a 5% withdrawal (15k) p.a. attract?
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It's taxed as income and therefore depends on what other income you have in the same tax year. For example, if you have €30,000 income from other sources and draw €15,000 from your ARF then in that year your overall taxable income is €45,000.

JackD said:
Am I over-optimistic in assuming a 5% level of growth in the ARF each year - in other words, is such an annual 5% withdrawal likely to erode my initial capital lump sum?
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Now that's a BIG question and goes to the heart of your choice of ARF product and fund(s). Remember that in order to avoid erosion of your capital the ARF would need to be achieving 5% after any product charges, so the advice would be to seek an ARF with relatively low charges. Let's say the ongoing charges are 1% per year then your fund would need to grow at 6% per year to avoid erosion.

There are funds that will average 6% per year out there, but not on a guaranteed basis. So you'd have to accept a level of risk in order to achieve a potential for 6% per year. You'd need to consider if the potential downsides of such a fund are acceptable to you in order for the potential to achieve your aims. Or else accept a certain level of capital erosion.
 
I have a quick question, I'm totally green about pensions so I hope I can make sense.

My wife has had to quit her job for personal reasons and more than likely won't be returning to the work force for the foreseeable future. She has a pension with her last employer which she basically wants to cash in to keep us afloat for as long as possible, she's 37. She has been told that she doesn't have that option, all she can do is leave the funds where they are until she's 50 and then take early retirement or transfer to another pension fund...and that's it, no other options! The pension is with Irish Life I'm not sure of the type of pension it is.
 
Hi Nermal,

The transfer value when calculated will take account of the underfunded position of the scheme.
Standard Life recently produced a helpful briefing note covering some of the issues you need to look at if considering transferring from a DB scheme. If you send me a pm I can e-mail you a copy if you wish.
I dont have visibility of the basis of the calculation of the transfer value but if you request it, the scheme administrators or Trustees should be able to provide you with a transfer value. I hope that helps.

regards Vincent
 

Yes, the Government do insist that pension funds are locked up until retirement. That's one of the quid pro quos for getting tax relief on pension contributions.

If your wife is in serious ill-health, she may be able to apply for early retirement due to ill-health, before age 50.
 
Thanks for the reply, I've done some research and that indeed seems to be the case. It's not the end of the world, thanks again.
 
Pension question

Hi Liam,

You seem to know a bit about pensions so I was wondering could you help to resolve an issue I am trying to sort out. I have just left my employer of two years and found out that I can cash in my pension, my employer was based in Aberdeen and I live in Ireland, I was working offshore on the rigs was travelling over and back to UK, Denmark and Holland for the past two years, my pension was with Zurich International and between myself and employer it is worth 20000 euro, I still live here and am currently trying to buy some land so this few pound would be great help, my question is am I liable for tax if I do cash this in and if so to who the Irish or UK govt, I have a letter from Zurich saying that I am entitled to all contributions from myself and employer, any bit of info would be greatly appreciated.

Regards.

Lee
 
query

I am 61 years of age.I am a deferred pensioner from a previous employment and under the terms of that scheme had the right to retire at 60 without any actuarial reduction.That scheme is now under section 50 with the pensions board.
I am presently in employment and a member of a different scheme.
Can i successfully request to be paid my pension from the previous scheme ?
 

Are you sure it was an absolute right ?
You need to read the actual Trust Deed. Such provisions are normally subject to the consent of the employer and trustees. They won't give that consent if under a S 50. Nor will they allow early retirement.
 
No question about the right,absolute! I should say the scheme ha recd approval for a funding arrangement from the PB.Will study the trust deed,thanks for the reply
 
Male
33 years old on next birthday (April 2014)

From 2002 - 2008 approx I set up an AIB PRSA while working in private sector. Small contributions but enough to get started as I only joined full time employment in 2002. Fund is approx 8k

2009- present public sector DB pension. And an AVC with IPF.
Currently pay about €70 per fortnight to my vac to compliment my PS pension as I will never have full service, I will have 37 years if I stay till 65.

Ideal world is to retire at 60, obviously with reduced pension etc but we will worry about that closer to the time.

Maine question : should I consolidate my AIB PRSA into my AVC fund?
I don't pay into my PRSA and haven't done since joining the PS.

My mate, a tax advisor recommends opening a new vac fund with his company (Cornmarket) and transferring my current avc and PRSA into it.

Any advice welcome.
 
I'm not sure if you can transfer an "ordinary" PRSA fund into an AVC PRSA - transfers between certain types of pension plans are prohibited and I can't remember if this is one of them. Your mate should be able to confirm that.

Anyway, before considering transferring from one pension plan to another, you should think about the following and ask your mate to explain them to you: -

  • What's the benefit to you in transferring?
  • What are the charges that you are paying on the existing funds if you leave them where they are? What are the charges on the proposed AVC PRSA? You shouldn't transfer to a fund with higher charges unless there's a very good reason.
  • What fund choices do you have where the funds are? What fund choices do you have on the proposed AVC PRSA? Are the fund choices on the AVC PRSA more suited to your needs? How so?
  • If you transfer, you are changing how you can draw the funds at retirement. Make sure these changes are explained to you so that you know the impact of your decision.
 
Query, on an ongoing arf please.

Is it not funds in excess of 63,500 in your pension fund that the 5% is taken from.
eg ; if fund at year end is worth 163,500 you must take out 5% of 100,000 ie 5,000.
Then this 5,000 is taxed as ordinary income.Your fund drops to 158,500 .

(I see the minimum income requirement has been reduced to 12,700 in last budget from 18100 so ARFs might suit more people)
 

Hi Gerry,

If this is an ARF then the €63,500 should be in a separate product - the AMRF. So in your example the person would have €63,500 in an AMRF and €100,000 in an ARF. Withdrawal of €5,000 is required from the ARF and then it drops to a value of €95,000. Ignoring any growth or charges, if the ARF is still worth €95,000 next year then the income requirement next year is €4,750.

If this person has €163,500 in an ARF and has met the minimum income requirement elsewhere (e.g. has €12,700 lifetime annual income from somewhere else) then the 5% would be applied to the whole €163,500, i.e. their required income this year would be €8,175.

Cheers,

Liam
 
LDFerguson said:
I'm not sure if you can transfer an "ordinary" PRSA fund into an AVC PRSA
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Hi Liam
There is no problem in converting a PRSA into a PRSA AVC. This does not require a transfer into a new contract and can be done by endorcement to the original policy schedule.

Hi Kcire

That said I would think long and hard before I would convert a PRSA to a PRSA AVC as you are now linking a personal arrangement to an employer scheme scheme rules!

In practical terms the converted PRSA to AVC retirement age would increase from 60 to 65 (you mentioned that you would like to retire at 60). If you leave employment at age 50 to 60 you could have also accessed your PRSA but because you linked it to the employer scheme you would not be able to access monies until 65!
 
I finally bit the bullet and found the box with all the pension stuff in it and am trying to sort through it all. I have two Irish pensions from employment there. I never got around to transferring Pension 1 to Pension 2 when I switched employer.

Pension 2 was easy enough. In 2007 I was sent a letter with log-on details to the Eagle Star website and amazingly, even though I never logged on then and Eagle Star now seems to be Zurich, those details worked and I was able to see my pension. When I left Ireland in July 2008 I had just over 5,000 paid in (between mine and employer's contributions). Although it dipped severely in 2009 it's now up over 45%, which seems like a good enough performance. I've requested a full benefit statement to be sent to me.

Pension 1 is a bit different. The company I worked for with this pension closed down/pulled out of Ireland in 2007 (I had already left in 2002). I had a letter from 2006 from Coyle Hamilton with a New Ireland contact and policy number. I have contacted them and requested a benefit statement. The guy I spoke to explained that the pension scheme had been wound up and what I have now is a retirement bond for me individually rather than being in a group scheme. I'm not sure how much I paid in to that, but he mentioned that it has gained about 1,000 euro since it was started in 2007. So, we're not talking about huge amounts of money.

He also mentioned that it would be possible to transfer that bond to a pension scheme here in Germany if it was a company scheme. He didn't really seem to know much more about that, though. Does anyone know where I could find out more about what types of schemes are covered by that and what would be involved in transferring that bond to Germany? I was told the other day by a German pension provider (I'm setting up a pension through work since I just realised they also match contributions up to 30% and there are tax advantages - not sure how I missed those key pieces of information four years ago when I set up a private pension!) that it is not possible to transfer a pension from Ireland over here. So which is it?

And then I get to figure out how all of this should work from a tax point of view, too. Oh joy. Still, at least I should have something to buy a few cups of tea with when I'm older.
 
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