Zurich Master Trust or PRSA

[BikeShed]

I'm 35, working as a contractor and set up as an umbrella director. My income will be between €220,000 - €250,000 in 2025.

I'm looking to maximise my pension contributions to reduce my higher rate of tax for the year. I plan to stay working like this for another 5 years and then eventually go back to permanent employment.

I would like to access 25% of my pension when I'm about 50-55.

Can anyone recommend whether I'm better off with a Zurich PRSA or Master Trust Pension? What are the pros and cons? I currently have a Master Trust set up and I don't really understand the difference between them.

Thanks in advance.

 

[S class]

Great money in bike shed contracting.

 

[Steven Barrett]

I'm 35, working as a contractor and set up as an umbrella director. My income will be between €220,000 - €250,000 in 2025.

I'm looking to maximise my pension contributions to reduce my higher rate of tax for the year. I plan to stay working like this for another 5 years and then eventually go back to permanent employment.

I would like to access 25% of my pension when I'm about 50-55.

Can anyone recommend whether I'm better off with a Zurich PRSA or Master Trust Pension? What are the pros and cons? I currently have a Master Trust set up and I don't really understand the difference between them.

Thanks in advance.

You have to go with a Master Trust. To access a PRSA before age 60, you have to have retired. That is not the case with a Master Trust, you just have to have left employment.

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[ClubMan]

You have to go with a Master Trust. To access a PRSA before age 60, you have to have retired. That is not the case with a Master Trust, you just have to have left employment.

But in the former case you just sign a declaration that you're finished working but, as far as I know, it's not strictly binding and you could still go back to some form of paid work if you choose? That's what I've done to access some of my PRSA at age 58 although, right now, I have no specific plans to renege on my declaration of retirement and return to work.

 

[Steven Barrett]

But in the former case you just sign a declaration that you're finished working but, as far as I know, it's not strictly binding and you could still go back to some form of paid work if you choose? That's what I've done to access some of my PRSA at age 58 although, right now, I have no specific plans to renege on my declaration of retirement and return to work.

It is something the Revenue can check easily enough and enforce. Under a MT, there is no issue at all.

 

[ClubMan]

Enforce how? Force you to stop working? I presume that they can't do that? Or, perhaps, claw back tax relief on any lump sum taken?

I was advised that it's was just a formality and didn't actually prevent me from working again later if I decided to do so not would there be any problem if I did.

At the moment it's moot since I have no plans to do so but I'd like to know that I could if I changed my mind.

 

[LDFerguson]

People retire and then, for one reason or another, decide to take up another job later in life. Boredom is one reason. Lending their skills and experience to a friend's business is another. An exciting opportunity is another. PRSA early retirement (50 - 59) rules specify that you must be retiring from all employments at that time. There's nothing in the rules to say that you must never work again.

 

[LDFerguson]

I'm 35, working as a contractor and set up as an umbrella director. My income will be between €220,000 - €250,000 in 2025.

I'm looking to maximise my pension contributions to reduce my higher rate of tax for the year. I plan to stay working like this for another 5 years and then eventually go back to permanent employment.

I would like to access 25% of my pension when I'm about 50-55.

Can anyone recommend whether I'm better off with a Zurich PRSA or Master Trust Pension? What are the pros and cons? I currently have a Master Trust set up and I don't really understand the difference between them.

Thanks in advance.

I wrote this last November. You might it useful in comparing the two. https://ferga.com/latest-news/f/differences-between-a-master-trust-and-a-prsa

 

[ClubMan]

People retire and then, for one reason or another, decide to take up another job later in life. Boredom is one reason. Lending their skills and experience to a friend's business is another. An exciting opportunity is another. PRSA early retirement (50 - 59) rules specify that you must be retiring from all employments at that time. There's nothing in the rules to say that you must never work again.

Thanks a lot @LDFerguson.

 

[poorrelative]

I wrote this last November. You might it useful in comparing the two. https://ferga.com/latest-news/f/differences-between-a-master-trust-and-a-prsa

What a great article @LDFerguson ...cleared up a lot of misinformation in my head (with PRSA I thought I had to divest from company if retiring early).

It does raise another question for me though, with a vested PRSA, does the 4% rule apply like with an ARF or can you withdraw variable amounts as needed and no minimum annual withdrawl?

 

[Realcork]

I think there is different interruptions between providers on whether you need to sell shares in the employer company if you want to retire between 50 and 60 from a PRSA so worth confirming with broker/provider in advance

 

[Steven Barrett]

Enforce how? Force you to stop working? I presume that they can't do that? Or, perhaps, claw back tax relief on any lump sum taken?

I was advised that it's was just a formality and didn't actually prevent me from working again later if I decided to do so not would there be any problem if I did.

At the moment it's moot since I have no plans to do so but I'd like to know that I could if I changed my mind.

I don't actually know. People maturing their pensions before age 60 is a rare enough event and maturing PRSAs is even rarer, I have not had a case yet where we matured a PRSA before age 60. As Liam said, people may go back to work in the future. I am sure the life company will want to see that the policyholder has left their job when maturing their PRSA early.

What a great article @LDFerguson ...cleared up a lot of misinformation in my head (with PRSA I thought I had to divest from company if retiring early).

It does raise another question for me though, with a vested PRSA, does the 4% rule apply like with an ARF or can you withdraw variable amounts as needed and no minimum annual withdrawl?

A vested PRSA is subject to imputed distribution rules.

I think there is different interruptions between providers on whether you need to sell shares in the employer company if you want to retire between 50 and 60 from a PRSA so worth confirming with broker/provider in advance

If you have more than 20% of the voting rights in a company, you must severe all links with the company in order to draw your pension down early, including selling your shareholding. You cannot stay on in a consultancy role, which is a lot more common now than in previous years.


People have an unnecessary fixation on the ability to access their pensions early and spend a lot of time giving weight to this feature over others, when in reality, very few people actually mature their pensions before age 60. Many times I have to move the conversation on to more important areas of pension planning with clients who concentrate on this area when it is clear they won't be in a financial position to retire early and exercise this option.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

 

[LDFerguson]

What a great article @LDFerguson ...cleared up a lot of misinformation in my head (with PRSA I thought I had to divest from company if retiring early).

It does raise another question for me though, with a vested PRSA, does the 4% rule apply like with an ARF or can you withdraw variable amounts as needed and no minimum annual withdrawl?

Exact same rules for a Vested PRSA and an ARF in terms of required withdrawals.

 

[Fortune]

I think there is different interruptions between providers on whether you need to sell shares in the employer company if you want to retire between 50 and 60 from a PRSA so worth confirming with broker/provider in advance

It depends on whether or not the person is a director of the company