What type of Pension ?

E

EMN

Guest
I run a small business and have both self employed & employee status.
Up until now, I do not have a retirement plan thus relying on my husband's top class defined benefit scheme for both of us.
My employee status is with a company which recently offered to put €250 per month into a pension for me.
I am with that company since 2001 and intend continuing working for the next 7 years (I am in my late 50's, unfortunately...but look a lot younger or so I've been told !).
I presently earn c€7,000 per annum from that employment.
So, my question is ..What type of pension will allow me take the maximum tax free lump sum and the balance (less standard rate tax) in cash as this balance would only purchase a very modest (negligible) annuity.
I have taken advice but do not understand much of the rationale or terminology which has included PRSA, EPP, x/80ths, 25% or 1.5 times,Trivial Pension and much more.
I am a standard rate tax payer and my husband a top rate tax payer.
I feel that the company is being generous with its offer to fund a pension for me but, at this stage, could any of you point me in the right direction as to what type of pension plan would meet my criteria of taking the maximum (tax free) lump sum & the balance by way of a (taxable) lump sum ?
A secondary question, does it make sense for me to contribute even a modest amount, say, €50 or €100 per month as I am only a standard rate taxpayer ?
EMN
 
250 for 7 years is only 21k

If they were willing to pay you the 250 in salary I would take it. If its pension or nothing obviously take the pension route,go for a low cost prsa
 
You mention that you have no previous pension arrangements. If you have a total of (say) 25k built up in 7 years time, there's a good chance you'll be able to take it all in cash.

You mention that you joined the company in 2001, so you will have somewhere around 13 to 14 years service completed when you retire. This will entitle you to take around 70% of your salary (around €5,000) as a tax free lump sum under an occupational pension scheme. If the balance of your pension fund is worth €20,000 or less, you will be able to take it as a once off taxable pension payment under the trivial commutation rules.

You could increase the amount you can take as a tax free lump sum by having some (or most) of the €250 per month paid in as an AVC instead of a company pension contribution.

However, topping up the €250 per month by additional AVCs may work against you if it brings your residual fund over the €20,000 trivial commutation limit (or whatever limit happens to apply when you retire).

Hope this helps

Homer
 
If you were to set-up a PRSA then the benefits could be taken in the form of a 25% tax-free lump-sum and the balance could be transferred to an AMRF, it may suit what you need.

However, it may be a good idea for you to seek independent advice.
 
You must log in or register to reply here.
Back
Top