How best to retire

[phoenix53]

Personal details

Age: 59
Spouse’s/Partner's age: 61

Number and age of children: 2 children. One is independent and the youngest is living at home, 1 more year in college and works part time. So really funds themselves.


Income and expenditure
Annual gross income from employment or profession: 17000 (part time). I will work until 65 all being well.
Annual gross income of spouse: 75000

Monthly take-home pay 1100 and 3500 (pension contributions paid and car bik paid before spouse take home pay)

Type of employment: e.g. Civil Servant, self-employed - Private Sector

In general are you:
(a) spending more than you earn, or
(b) saving?

Saving


Summary of Assets and Liabilities

Family home worth €850k with a €0 mortgage

Cash of €100,300 Bank of Ireland recently transferred from KBC (need to do something with this) (Joint Account)

Cash of 25000 in AIB savings account (emergency fund and also holidays etc, try to keep balance at 25000) (Joint Account) I put my salary into this account.

Investment Bond (Single Premium) - Current surrender value €186000 (Joint names)

With Profit Investment Bond - continued on saving the SSIA. Save €500 per month - current surrender value €126000. This is in my name only, we just never got around to changing it to joint life. Should we?

Spouse - Defined Contribution pension fund: Current PRSA €468k + 20000 paid up personal pension plan + STG 50000 in an old paid up UK pension scheme. (We have tried to max the contribution allowed on the PRSA over the past few years)
Spouse will also be eligible for UK old age pension after following advice received here on seeking eligibility re backdating contributions. They will also be eligible for whatever ROI social welfare pension there is at the time.

Me - Defined benefit pension from old employment. Pension starts at 60. Annuity will pay approx 37000 pa with 66% payable to spouse if I die before them. Also an option to take a TV before retirement at 60. It was 800,000 but I believe this will have reduced significantly from reading topics here due to annuities being cheaper to provide. I have not received an updated pension benefit statement as yet.

DB pension from Company will reduce by the value of the social welfare pension once I get to old age pension age. I will qualify for full SW pension at that time.
I have also put in a request to see if I am eligible to pay anything to a UK pension as I worked there for just shy of 3 years. That may or may not be a runner.

Also small DC pension with current employer. i contribute around €70 pm, employer €100 pm. I haven't increased this as I really don't know if it is worth it or not. I only joined the scheme around 2 years ago so projected fund is very small.

Company shares : €20,000k
They yield dividends of around €2000 pa gross. I bought some when I was employed by the Company so as far as I am aware, I could sell that element tax free but I really don't know how to go about looking into doing that.

Buy to Let Property worth Stg 80000k . No mortgage. Bought years ago at a reduced housing executive price. Increase in value about STG 70,000 since we bought it so tax of some kind or other will be payable on that increase when we decide to sell it.


Family home mortgage information - N/A
Lender
Interest rate
If fixed, what is the term remaining of the fixed rate?
We may downsize in time, just don't feel the need to yet.

(No need to tell us the monthly repayments or what term is left)

Other borrowings – car loans/personal loans etc - NONE

Do you pay off your full credit card balance each month? YES
If not, what is the balance on your credit card?


Buy to let properties
Value: STG 80000
Rental income per year: STG 6000
Rough annual expenses other than mortgage interest : STG 1000 (Rates and letting agent fees) Tax paid circa 2500 pa
Lender
Interest rate
If fixed, what is the term remaining of the fixed rate?

I'm not sure how this would be dealt with in the event of both of us dying. Should we have a UK will in place or can we deal with it in our ROI will?

Other savings and investments:

Do you have a pension scheme? Yes

Do you own any investment or other property? Yes as above.

Other information which might be relevant

Life insurance: minimal

250000 on spouse to expire at age 65. Other life assurance expired. Death in service for myself. Salary x 3


What specific question do you have or what issues are of concern to you

My husband would like to retire from his job in the next year or so. He may retire fully or reduce to a couple of days if possible.

My DB pension will start next year and I feel that if we go for the annuity rather than a TV we will at least have a definite amount coming in every month and we can supplement this with money from our investments and part time work as and when we need it. My spouse feels that it might be best to take the TV and invest it. I get that, because it is hard to bypass a large sum of money and I know you are taking a chance and hoping not to die before you get value from the annuity but I would really like a bit of certainty and stability at this stage of our lives and for us not to have all our eggs in the one basket.

My fear for retirement is money spent not being replenished by salary. And what if we run out! I know I have to get over that but it is there. I think that is why the annuity appeals.

Like lots of investors, my spouses pension pot has decreased in value over the last year or so, so I feel the longer we can leave that without touching it, the better. It will give the fund a chance to grow. I do realise funds can go down as well as up but if we don't need the money now, I think we should leave it alone. My understanding is that as long as we take the tax free and set up an ARF by the time my spouse is 70, that should be ok.

With the DB scheme (not taking the tax free amount, which we probably will take and live off that for a couple of years), we should have a gross income of approx €55000 pa (DB and my part time work) along with supplements from savings, I think we would be ok.

I have asked questions on pensions before, but it is all getting so close now, I thought I would ask again peoples opinion on our current situation and what you consider might be the best thing to do. I don't think the figures will change much over the next year or so.

Such a relief to get that out of my head and in writing...

Thanks for taking the time to read this.

 

[NoRegretsCoyote]

And what if we run out!

You will have possibly four state pensions and two decent private pensions on top. You also have a valuable house with a mortgage paid off and a BTL. You will never run out!

The one thing to think about is that you have a lot of cash on deposit which is losing value due to inflation. Normally I would advise you to max pension contributions but it seems like you are going this already.

In your shoes I would be looking at how to most tax-efficiently transfer wealth to my kids. I would start with the €3k a year small gift exemption to help them build up a fund to buy a house.

 

[phoenix53]

You will have possibly four state pensions and two decent private pensions on top. You also have a valuable house with a mortgage paid off and a BTL. You will never run out!

The one thing to think about is that you have a lot of cash on deposit which is losing value due to inflation. Normally I would advise you to max pension contributions but it seems like you are going this already.

In your shoes I would be looking at how to most tax-efficiently transfer wealth to my kids. I would start with the €3k a year small gift exemption to help them build up a fund to buy a house.

Thank you for the reply.

I don't think the UK pension will be a runner for me but we will wait and see. Also my DB pension will reduce by the amount of the SW pension at 65 so that will become one payment.

Can I ask your opinion on the annuity v arf issue? Do you think it is better to have the DB as an annuity and the PRSA as an ARF so as to spread the risk a bit?

Thank you.

 

[Marc]

So much to look at here.

Does one of you have a connection with the U.K.?

It could be that one of you is U.K. domiciled. This could present some interesting planning opportunities (I.e no Irish tax on your investments and some of your pensions)

Everlake Approaching Retirement Guide - Everlake

Investors should understand their retirement options at least five years prior to their proposed retirement date.

everlake.ie

 

[phoenix53]

So much to look at here.

Does one of you have a connection with the U.K.?

It could be that one of you is U.K. domiciled. This could present some interesting planning opportunities (I.e no Irish tax on your investments and some of your pensions)

Everlake Approaching Retirement Guide - Everlake

Investors should understand their retirement options at least five years prior to their proposed retirement date.

everlake.ie

Hi Marc, no, no connection with the UK anymore, other than we have a house there that is currently rented out and my spouse was born in the UK and worked there for 13 years or so before moving to the Republic.

 

[Marc]

Ok. Was their father Irish? If not, your spouse most likely has a U.K. domicile of origin.Given the house they haven’t broken all ties with the U.K. for tax purposes.

This means that they are most likely taxed on a remittance basis. This means they only have to pay Irish tax on income or gains that are remitted to Ireland.

This all turns on the nationality of their father

 

[phoenix53]

Father was Northern Irish.

 

[Marc]

Ok. Well that’s clear. Like me your spouse is almost certainly Irish resident but non domiciled.

Which makes for some interesting planning opportunities. It does mean they’re keeping company with the likes of Rishi Sunak which isn’t everyone’s cup of tea but it’s not every day you get the opportunity to chose how much tax you would like to pay.

Happy to talk you through this in more detail if you’re interested

Everlake Financial Advisors Dublin

Expert financial planning with ethical conviction

everlake.ie

 

[phoenix53]

Thanks Marc. Leave that with me. Your website is very detailed on the services you provide. Nice to see such detail.

 

[JimmyB99]

Hi Marc,

I've been wondering about this for yonks and it's probably valid to place in this thread. The link below is an explainer on Domicile.

UK Domicile and Non-Doms – an explainer

This explainer sets out how the domicile rules work, focusing mainly on income tax and capital gains tax.

www.tax.org.uk

This bit is what I've often seen before:

Q. What does it mean to be UK-domiciled or non-domiciled?​

An individual is domiciled in the UK if they ‘belong’ in the UK and it is their home. This is usually established through their parents’ (usually father’s) domicile at the date of the individual’s birth, known as ‘domicile of origin’; or by making the UK their permanent home and renouncing their native land. This last possibility is generally referred to as a ‘domicile of choice’, but that term perhaps understates the difficulty of making such a change: it is not a matter just of deciding, but of carrying through that decision in one’s style of life. We understand that Ms Murty is domiciled in India by origin, i.e. by virtue of her father’s own domicile when she was born, and she has not acquired a domicile of choice here.

And so to my question.......

Jack the First is born in the UK and can trace his family's UK lineage to a few centuries prior to the Magna Carta - i.e. he's UK domiciled!

He meets a red-haired cailin, the heart rules the head perhaps and off with him to Dublin where the fruits of this love story is Jack the Second. Is Jack the Second UK domiciled given that his old man certainly was at the time of his birth?

If yes, what happens when Jack the Second comes of age and starts his own family? Say, Jack the Second never chooses to change his domicile. Is Jack the Third UK domiciled if Jack the Second is still UK domiciled upon his birth?

And so it goes......

Presumably in circumstances like this example, domicile is clear one way (i.e. UK) then it becomes greyish and then it's clear the other way (Irish). I guess the question is when does one enter and exit the grey area.

 

[Marc]

Hi Marc,

I've been wondering about this for yonks and it's probably valid to place in this thread. The link below is an explainer on Domicile.

UK Domicile and Non-Doms – an explainer

This explainer sets out how the domicile rules work, focusing mainly on income tax and capital gains tax.

www.tax.org.uk

This bit is what I've often seen before:

Q. What does it mean to be UK-domiciled or non-domiciled?​

An individual is domiciled in the UK if they ‘belong’ in the UK and it is their home. This is usually established through their parents’ (usually father’s) domicile at the date of the individual’s birth, known as ‘domicile of origin’; or by making the UK their permanent home and renouncing their native land. This last possibility is generally referred to as a ‘domicile of choice’, but that term perhaps understates the difficulty of making such a change: it is not a matter just of deciding, but of carrying through that decision in one’s style of life. We understand that Ms Murty is domiciled in India by origin, i.e. by virtue of her father’s own domicile when she was born, and she has not acquired a domicile of choice here.

And so to my question.......

Jack the First is born in the UK and can trace his family's UK lineage to a few centuries prior to the Magna Carta - i.e. he's UK domiciled!

He meets a red-haired cailin, the heart rules the head perhaps and off with him to Dublin where the fruits of this love story is Jack the Second. Is Jack the Second UK domiciled given that his old man certainly was at the time of his birth?

If yes, what happens when Jack the Second comes of age and starts his own family? Say, Jack the Second never chooses to change his domicile. Is Jack the Third UK domiciled if Jack the Second is still UK domiciled upon his birth?

And so it goes......

Presumably in circumstances like this example, domicile is clear one way (i.e. UK) then it becomes greyish and then it's clear the other way (Irish). I guess the question is when does one enter and exit the grey area.

It’s a good question.

Domicile is a matter of fact. You are born with ONE and it’s difficult to change.

Over time I might take steps to abandon my domicile of origin and acquire a domicile of choice but it’s a conscious decision.

It also matters what one’s intentions are. If I’m marched into Dublin Castle and put in front of the Revenue Commissioners and they ask where do I call home and I say the U.K. then it’s case dismissed.

To the best of my knowledge Revenue on both sides of the Irish Sea have never won a case against a live taxpayer.

Now, if I’m dead and my wife is trying to sort out my estate then it’s a different matter and that’s when things are more “grey” whatever about my intentions during life, what actually happened will have a clear bearing on who has taxing rights on my estate.

When it comes to the next generation. My kids both have Irish passports and were born in the Rotunda. My wife is Irish and her father is Irish. My kids take the domicile of their Father so they would currently have a U.K. domicile.

When they are 18 they can take steps to acquire a domicile of choice.

It also works the other way. If you are Irish and move to the U.K. after a period of time you will automatically be deemed U.K. Domiciled.

 

[JimmyB99]

When they are 18 they can take steps to acquire a domicile of choice.

Thanks Marc,

This is the bit I find particularly interesting. If your children do nothing to change their domicile - from my very limited appreciation of the subject - then it seems to me that it's possible for them to be still UK domiciled at age 25 or 30? Let's term this "child making" age. And so, can the cycle continue indefinitely - i.e. the new children (your grandchildren!) are still UK domiciled until they become 18 when they, in turn, presumably can take steps to acquire a domicile of choice!!

Two points strike me re all of this.

1. Most folk of 18 or so years could give a care re their domicile (......implying domicile of birth may endure for a long, long time?)
2. Interesting that the gender of one's children could determine the domicile of one's grandchildren!


OP - apologies for this diversion but it may well be relevant to your future planning. At a general level, you'll have bread and butter and jam on your table for many the year.

 

[Pmc365]

It’s a good question.

Domicile is a matter of fact. You are born with ONE and it’s difficult to change.

Over time I might take steps to abandon my domicile of origin and acquire a domicile of choice but it’s a conscious decision.

It also matters what one’s intentions are. If I’m marched into Dublin Castle and put in front of the Revenue Commissioners and they ask where do I call home and I say the U.K. then it’s case dismissed.

To the best of my knowledge Revenue on both sides of the Irish Sea have never won a case against a live taxpayer.

Now, if I’m dead and my wife is trying to sort out my estate then it’s a different matter and that’s when things are more “grey” whatever about my intentions during life, what actually happened will have a clear bearing on who has taxing rights on my estate.

When it comes to the next generation. My kids both have Irish passports and were born in the Rotunda. My wife is Irish and her father is Irish. My kids take the domicile of their Father so they would currently have a U.K. domicile.

When they are 18 they can take steps to acquire a domicile of choice.

It also works the other way. If you are Irish and move to the U.K. after a period of time you will automatically be deemed

 

[phoenix53]

Thanks Marc,

This is the bit I find particularly interesting. If your children do nothing to change their domicile - from my very limited appreciation of the subject - then it seems to me that it's possible for them to be still UK domiciled at age 25 or 30? Let's term this "child making" age. And so, can the cycle continue indefinitely - i.e. the new children (your grandchildren!) are still UK domiciled until they become 18 when they, in turn, presumably can take steps to acquire a domicile of choice!!

Two points strike me re all of this.

1. Most folk of 18 or so years could give a care re their domicile (......implying domicile of birth may endure for a long, long time?)
2. Interesting that the gender of one's children could determine the domicile of one's grandchildren!


OP - apologies for this diversion but it may well be relevant to your future planning. At a general level, you'll have bread and butter and jam on your table for many the year.

Thanks Marc,

This is the bit I find particularly interesting. If your children do nothing to change their domicile - from my very limited appreciation of the subject - then it seems to me that it's possible for them to be still UK domiciled at age 25 or 30? Let's term this "child making" age. And so, can the cycle continue indefinitely - i.e. the new children (your grandchildren!) are still UK domiciled until they become 18 when they, in turn, presumably can take steps to acquire a domicile of choice!!

Two points strike me re all of this.

1. Most folk of 18 or so years could give a care re their domicile (......implying domicile of birth may endure for a long, long time?)
2. Interesting that the gender of one's children could determine the domicile of one's grandchildren!


OP - apologies for this diversion but it may well be relevant to your future planning. At a general level, you'll have bread and butter and jam on your table for many the year.

Hi, no problem with the diversion at all. The whole area is new to me and it looks like we will need to go back to the drawing board.

I know it is best to look at things as a whole but going back to a question I asked earlier which was - Can I ask your opinion on the annuity v arf issue? Do you think it is better to have the DB as an annuity and the PRSA as an ARF so as to spread the risk a bit?

What do you think?

 

[Marc]

That’s too complex a question for a simple answer.

It really depends on your preferences mainly for flexibility and tax efficiency vs your desire for guarantees. But the default is generally going to be not to take a transfer from a defined
benefit pension unless there is a very clear benefit to you in doing so.

You really should look at this whole process in the round rather than thinking of it as a series of individual questions. The financial planning process is designed specifically to help you figure out all these trade offs.

Everlake Approach to Financial Planning - Everlake

This guide explains our role as your financial planner, and what you can expect from the financial planning process and your financial future when we work together.

everlake.ie

 

[phoenix53]

Thanks Marc.

You're right, my preference is to have the guarantee of the DB so that we can rest a little easier with the flexibility for the rest of our investments.

But I do take your point of looking at it in the round.

 

[Right Winger]

It could be that one of you is U.K. domiciled. This could present some interesting planning opportunities (I.e no Irish tax on your investments and some of your pensions)

Interesting. How might this work for Irish tax residence? Could existing Irish investments and/or pensions be offshored? (Legally, of course)

 

[Marc]

Interesting. How might this work for Irish tax residence? Could existing Irish investments and/or pensions be offshored? (Legally, of course)

Yes exactly.

I moved my own Irish pension to Malta and now have an income paid to my N26 account. I’m in Cape Town next week and can spend the income there tax free.

I also have an investment account in the Isle of Man. Provided I invest in instruments which aren’t deemed to be similar to an Irish fund then the income and gains can roll up offshore tax free.

Income and or gains can be spent offshore tax free.

I can also bring capital into Ireland free of tax because Revenue don’t tax you spending your own money.

Income remitted to pay for education and maintenance of a child in full time education and under the age of 25 is parenting and also not a taxable remittance.

Lots of scope for tax efficient planning and according to the last census it’s applicable to around 20% of the population.

 

[qwerty-2023]

Hi all, I'm very confused by this domicile/residence issue. I am an EU citizen but moved to Ireland for college at age 16 and have lived here ever since (with a couple of year-long stints of working abroad) so I consider Ireland my home. Would I be domiciled in my country of origin? I haven't applied for Irish nationality because as an EU citizen I didn't think it would impact on my daily life (taxes, social welfare, healthcare, etc.) but maybe I should? Apologies for hihghacking the thread and thanks in advance for any pointers!

 

[phoenix53]

Update. How time flies. 60 in March and defined benefit options have arrived. Hubby has decided to continue to work for another couple of years due to a succession situation in work where he cannot/won't walk away and leave them in the lurch. We're happy with that decision for the moment.

I've forgotten about the TV. I want some stability around income. We will have to make ARF/annuity decisions with my husbands pension and I think that'll be enough risk for us.

My DB options are:

(a) Pension 40108 pa
or
(b) Tax Free Lump sum 96002
plus
reduced pension 34684

My pension figure will reduce by 4266pa at 66 but by then I will be entitled to a full state contributory pension. So while losing on one hand, I should gain on the other. Something like, 34684 will reduce to approx 30000 but adding old age pension should bring me up to about 43000. Does that sound right?

My husband will be entitled to a spouses pension on my death of 66.67% (26739) regardless of whether I pick (a) or (b) above.

(c) I also have AVCs of 29039

With these, I can include this figure in my lump sum amount (I cannot exceed 96002) and use the amount saved from my lump sum (the same as my AVC amount) to increase my pension by about 1800 pa.

I have also found out through this forum that if I pay my NICs to HMRC in the UK, I will be entitled to a weekly pension at pension age. Thanks AAM for pointing me in that direction.

My plan is to go with (c).

At the moment, I am surrounded with paper and it is a little overwhelming but onwards and upwards.

Thanks for all the help to date.