Can a PRSA be locked beyond 60?

S

Sammy Wilson

Registered User
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Hi,

Some advice for a financially illiterate and physcially disabled former manual labourer and housewife

Age: 58 + 57
Cash pile: 150k EUR
Income: Disability allowance, jobseekers allowance, plus foster care income for two children (Approx 5k EUR per month total household income)
They have no pension or other assets.

They would like to create a PRSA as they have no pension, to accompany the state contributory pension. The problem is, with PRSAs at 60 they become taxable, thereby removing the eligibility of disability / jobseekers.

Therefore, they would like to create a PRSA (Zurich 5*5) but lock it until they are 70, to allow it to grow and not impact their social welfare, for when the income from fostering will cease but standard PRSAs become an assessable form of income after 60 - so is there a way to 'lock' it?
 
As they don't seem to have "earned income" for Income Tax purposes, then I don't think they'd get any tax relief on a PRSA contribution, other than tax-free growth on the fund. That said, if they're tax exempt in retirement, then this might not be such a big issue.

They can make contributions to a PRSA now but they don't need to retire it until they're 75 so no need to take withdrawals from it until then.
 
But if it's 'accessible', it becomes a potential source of income, in the same way as a non-cash producing asset, which could be sold. So if they set one up now at 57/58, at 60 it becomes 'accessible' and thereby they'll lose social welfare income.

Having the PRSA inaccessible or 'locked' means they can justifiably argue that they don't have any other source of income - which is what i'm wondering if they can do that.
 
A PRSA only becomes "accessible " when its ultimately converted to an ARF or at age 75. Up until then, there us no requirement to drawdown any income.
That said, I cannot see any logical reason why anyone whose total income comes from Social Welfare payments would want to set up a PRSA. Presumably at age 66 they will qualify for the State Pension (Non-contributory? ). Even if they established a PRSA , I doubt the resulting income would be sufficient to disqualify them from receiving SW payments.
 
You pick the retirement age of the PRSA from age 60 - 75. If Welfare says once a pension is accessible, then it counts as income, there is nothing you can do. Pensions cannot be locked away like that.

And I would echo what the others have said so far, it makes zero sense to contribute to a pension. There is no tax relief on the contributions and after the tax free lump sum, the remainder is taxed as income.

Having an income in retirement isn't just traditional pension income. You could have 10 investment properties providing you with rental income. Or just a pile of cash in the bank. As long as they have something i.e. €150,000 plus disability incomes, it doesn't matter the source of it.


Steven
www.bluewaterfp.ie
 
Steven Barrett said:
You pick the retirement age of the PRSA from age 60 - 75. If Welfare says once a pension is accessible, then it counts as income, there is nothing you can do. Pensions cannot be locked away like that.

And I would echo what the others have said so far, it makes zero sense to contribute to a pension. There is no tax relief on the contributions and after the tax free lump sum, the remainder is taxed as income.

Having an income in retirement isn't just traditional pension income. You could have 10 investment properties providing you with rental income. Or just a pile of cash in the bank. As long as they have something i.e. €150,000 plus disability incomes, it doesn't matter the source of it.


Steven
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I considered not responding to this post for fear of sounding stupid, but here goes anyway. I've never set up a PRSA so wasn't aware you get to 'choose' the retirement age of it. When you mention there is no tax relief on the contributions, you're talking about tax relief from income? This isn't an issue since all of their income is not taxable / means tested anyway.

The problem is that currently they have a cash pile of 150k at home, in their bedroom. This obviously represents a huge risk, not least that it's not growing, or not accessible in any sort of sensible way. If they start to feed in as much as they can from their 5k a month income into a PRSA, now at the age of 60, to allow 10 years of growth, while in the meantime living off the cash (until it runs out), then at least by the age of 70 they'll have a pot which is usable.

It's as much about putting it to some use, as it is getting it into a bank account or some kind of 21st century structure.
 
They are keeping the money in cash in their bedroom, so when they are means tested they say that they don't have any money and can point to their empty bank account? And now they are looking for a safe home for this money?

An insurance company won't accept cash lodgments, so they will have to put it into their bank to transfer to an insurance company, leaving a paper trail for their fraud and deception.
 
Have you ever spoken to anyone from rural Ireland? I would venture this was the rule rather than the exception.
 
Sammy Wilson said:
Have you ever spoken to anyone from rural Ireland? I would venture this was the rule rather than the exception.
Click to expand...

That doesn't make it ok.
They are 57 and 58, it's not like they were some kind of couple in their old age, not having access to information. Obviously they aren't as financially illiterate as described.
 
Sammy Wilson said:
Have you ever spoken to anyone from rural Ireland? I would venture this was the rule rather than the exception.
Click to expand...
Why would someone from rural Ireland who keeps €150,000 in cash in their bedroom be talking to me?


My point stands, an insurance company won't accept cash payments...for obvious legal reasons.
 
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