Cash pension at 50 years

T

tammy1

Registered User
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3
Hello,

I have reached the milestone age of 50. I have a previous pension with previous employer worth 100k.
I am defo taking 25% tax free as need the money. I am so confused what to do with the rest. Not sure whether to take the balance and pay tax. I dont want annuity as afraid wouldnt get value if I died even though perfectly healthy now. I dont understand how ARF works. Can anyone advise. I know it is re invested. When can i access it then or do i need to be 65?
 
Life begins at 50...

Are you in another job right now? Are you paying tax on your salary at the higher 40% tax rate?

You can withdraw the remaining €75,000 all in one go but you'll be taxed on it as if you earned €75,000 like, say, a bonus. So you'll lose a large amount of it to taxes.

An ARF is a lump sum pension investment. You can choose the ARF company and what sort of funds you want the €75,000 to invest in. You can withdraw from it at any time. Any withdrawals you make will be taxable as if you earned the money. You don't have to withdraw anything from an ARF until the tax year in which you turn 61. So you could take the 25% lump sum now, put the other 75% in an ARF and leave it for 10 years. Then you can start withdrawing a minimum of 4% per year from it. A disadvantage of doing this is that if you're still working and paying higher-rate tax when you withdraw from the ARF, you'll lose half the withdrawals to taxes. It's preferable to wait until you have retired and your income then may well be taxed at the lower 20% rate or possibly not at all. It's also preferable to use your pension funds to provide yourself with an income in retirement. But if you need the tax-free lump sum now and have no other way of raising it, so be it.

Regards,

Liam
www.FergA.com
 
Hi

Is it the case that you can withdraw 25% of the pension fund if you are seriously ill (or the other 75% for that matter?). Or are there any similar restrictions to doing this?

Thanks
 
Last edited:
The Inquisitor said:
Hi

Is it the case that you can withdraw 25% of the pension fund if you are seriously ill (or the other 75% for that matter?). Or are there any similar restrictions to doing this?

Thanks
Click to expand...
Depends on the type of pension you have, and whether your life expectancy is <12months or if you're permanently incapacitated.
 
Thanks, so must you have one of these to be able to cash in 25% or 100% at 50?. Or can it be done without one of these?
 
The Inquisitor said:
Thanks, so must you have one of these to be able to cash in 25% or 100% at 50?. Or can it be done without one of these?
Click to expand...
You have to be aged over 50 and have left the employment the pension related to (or be out of all employment for a PRSA) to cash in 25%. The balance can then be cashed in, taxed as PAYE.

For ill health early retirement, there's various different rules and situations.
 
Hi Thanks for replies.
Am I right in thinking with ARF I can withdraw say 10% if I wanted say a year or 2 after I set it up. Although I know maybe more money in it the longer it invested. and less tax paid.
The pension company I am with is Zurich so they have been me and ARF with Zurich if I want it . I presume I can get one with another company of I so wish. There are loads of free advice pension providers on line any one experience of any?
 
tammy1 said:
Hi Thanks for replies.
Am I right in thinking with ARF I can withdraw say 10% if I wanted say a year or 2 after I set it up. Although I know maybe more money in it the longer it invested. and less tax paid.
Click to expand...
Yes until you hit 61 at which point you will need to draw down 4%
 
tammy1 said:
There are loads of free advice pension providers on line any one experience of any?
Click to expand...

Free advice is just a sales pitch, to get you in the door so that they can sell you something. Nothing wrong with that, but don't be under any illusion that you're getting anything for free.

There are several brokers who share their expertise regularly in the pensions area of Askaboutmoney. Have a root around at other threads here and you'll see them.
 
do you have a pension with your current employer? can you transfer the other 75% into that?
 
OK then, take it out, pay the tax and increase AVCs to the max until you've put 75K back into the new pension (if they're already maxing out their AVCs then this won't work, but if they "need the money" as stated in the OP, then that seems unlikely).
 
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