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

Janet said:
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?
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It is possible to transfer a pension fund from Ireland to Germany given that you're now living and working in Germany. New Ireland would need to be satisfied that the German pension is a "proper" pension arrangement with broadly similar rules to those here - no retiring until you're 50+, benefits to be taken in part as a lump sum and the balance as a pension.

The German pension arrangement would also need to be willing and able to accept the transfer. It sounds like perhaps it isn't.
 
cashing BOB

I have a BOB worth about 20k and am 50 yrs. From the previous answers, I know I can encash at 50 and take 25% tax free. Must I take the remainder as an annuity or can I take it as a lump subject to my marginal rate of income tax in that year? Any other info you can give on my options?
 
Is that all you have Seoy? If so, ask the life company to calculate your tax-free lump sum entitlement under the 150% of final salary rules and see what is higher.

As the remainder of your fund will be less than €20k, you can take the remainder as a lump sum payment and pay 10% tax on it.

Steven
www.bluewaterfp.ie
 
bob encashment

Thanks - I have other funds on PRSA and personal pension but this is a BOB from the short time that I was an employee many 20 years ago. This is the only funds I have in a BOB. I will continue to be self employed but want to cut back on work for a year to pursue other interests so thought it might be worth looking at extracting cash from BOB if it was beneficial but am not keen on having to take 75% as an annuity. Can I get that part out at 10% - never heard of this rate before? THanks
 
If, after taking your tax free lump sum, you have less than €20k, you can take what is called a trivial pension where you get the remainder of the fund as once off lump sum and pay 10% tax.

If you take 25% as a tax-free lump sum, you will have to satisfy the AMRF requirements. Without a guaranteed income of €12,700 per annum, you will have to purchase an annuity with the remainder or put it in an AMRF until you are age 75.

Steven
www.bluewaterfp.ie
 
Without a guaranteed income of €12,700 per annum, you will have to purchase an annuity with the remainder
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I've wondered about this before, do you know what is accepted as "guaranteed income" in this context. Despite what revenue might think income typically is not guaranteed.

Does the state pension count? Would dividends or interest count? What if you'd savings of a level that you could "pay" yourself 12700 per year?
 
BOB again

Thanks Steven,
Final q. I have 140k in other personal pensions and PRSA - would that allow me to meet the AMRF requirements and extract from BOB on the 25% TF lump sum/75% @10% tax that you describe?
 
The Revenue Definition of Guaranteed Income: State pension(Irish or from any other country) and life time annuity. Share dividend, deposit interest, lump sum deposits etc. cannot be considered guaranteed as the income that is produced is variable.

seoy. You would not be eligible for a trivial pension as under the rules of a trivial pension the remaining balance after taking your TFLS from all other pension sources must be less than €20,000.

Under the Trivial pension rule the remaining pension fund balance is taxed at your marginal rate and USC and PRSI is also deducted.

However if the value of your entire pension fund is unable to purchase an single life fixed income annuity of €330 per year, you may draw the entire fund subject to a standard tax rate of 10%. (not to be confused with income tax)
i.e. if the value of the entire fund is less than circa €8,000 you have to forgo the TFLS and pay 10% tax on the entire fund. USC and PRSI is not chargeable if availing of this method

This may or may not be the best option depending on your income for that year
 
Bob

Thanks Barracuda - seems clear that trivial pension route is not open to me as I have €140k in other policies. Am I correct in this?
To summarise, it seems I can get 25% of the €20k out as a TFLS but what are my options for the remainder? An annuity is not attractive.

Some background - The BOB arises from a DB scheme. Service length was 6 years although membership of the scheme was less - about 3-4 years. Final salary was €19812, (£15600 punts) in 1996.
 
Hi seoy, trivial pension is not an option alright. As your BOB originates from a DB scheme you will not be able to avail of the AMRF option and you will have to purchase an annuity. You will not be able to take 25% TFLS either and will have to use the years service calculation (3/80 X Salary X years servise)


There maybe ways round having to use the years service calculation such as set up a company and transfer the BOB into a single member company pension scheme or perhaps a friend could take you on as an employee for a month and set up a single member company pension for you!? Where there's a will there's a way ;-)
 
direct benefit scheme from previous employment. What to do?

Hello Liam. I would be super grateful if you can shed any light on this dilemma.
My husband has a db scheme from a previous employment but it is underfunded and does not allow early retirement. We are both 57 and will not qualify for any state pension for another 12 years. We can buy an annuity with the pension fund but it is not coming up with very attractive figures and an ARF would be much more beneficial for us. I know you are not allowed to set up an ARF from a db pension, but we are thinking of setting up a small business together and I am wondering if there is any way we can transfer the db money out of the under-funded scheme into our business with the aim of buying an ARF with it now or eventually? Thanks!
 
If you set up a limited company and start a token, company paid pension, you can transfer the DB into the new scheme. The transfer value from the DB scheme will be way lower than the real value of the benefit. It will be reduced further to reflect the fact that the scheme is underfunded.


Steven
www.bluewaterfp.ie
 
Many thanks for your help Steven. I suppose what is attractive about an ARF is that you have control over your money and if we die early the money goes to the estate, whereas with a direct benefit it dies with us. There is also a much reduced pension for me if my husband dies before me.
 
I have a small (c. €5k) pension scheme from an old employment in the UK. I looked into transferring it back to Ireland but to be honest the fees and charges here are vastly higher (1%+ versus 0.2% in the UK funds). As a result I am inclined to leave it where it is.

Does anyone know the consequences of leaving that fund as is? When it comes to retirement how do such small foreign pensions work from a tax perspective? Also, I assume I would be able to transfer back to Ireland to a buyout bond/PRSA in say 20yrs (when I am closer to retirement) if I wanted?
 
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