Can I take the tax-free lump sum from my pension in stages?

[AndroidMan]

Bear in mind that the aggregate tax-free lump sums that you can take from any pension arrangements is capped at €200k, lump sums between €200k and €500k are taxed @20% and any lump sums over €500k are taxed at your marginal rate.

Do you have to take that 25% immediately?
Or say 10% today.
And the 15% a year or two later?
This gives that 15% a chance to hopefully generate more growth.
Plus that 15% I assume would still be 15% of the value of the pension at the time I took out the 10k.

 

[LDFerguson]

Do you have to take that 25% immediately?
Or say 10% today.
And the 15% a year or two later?

If you have just one pension scheme fund / policy, then no - you must take the lump sum in one go.

You can choose to split PRSAs into multiple smaller PRSAs and retire each of them at different times, which gives a similar result.

 

[CharlieMac]

AVC PRSAs and PRSAs have different rules.

This came up before @LDFerguson and maybe I incorrectly understood your point about splitting a PRSA. Do you know if an AVC PRSA policy can be split into two policies?

I am interested in buying back "pension years" (Single Pension Scheme) from my PS employment at retirement by transferring value from an AVC PRSA. Then put whatever is left over in an ARF.

The Single Pension Scheme administrators told me I could not use "some" of the funds from an AVC PRSA for this purpose and put the remainder in an ARF. The only way to purchase additional pension benefits by way of transfer is to use the entire value of a PRSA or AVC PRSA because a "partial transfer" from these is not allowed due to Revenue rules.

Do you know could I split a AVC PRSA fund in to two policies at retirement, use one pot made to have just enough so I can transfer the full amount of it to buy "back pension years" from my PS employment and use the other as an ARF? I would still plan on "retiring" both policies at the same time to abide by the Single Pension Scheme rules requiring that.

My strategy would be specifically to start with one policy and later split it rather than open up two policies from the get go.

 

[LDFerguson]

Here's some relevant points that may help to clarify.

• In this thread, I was originally talking about a PRSA, not an AVC PRSA. It's possible to split a PRSA into multiple PRSAs and "retire", i.e. draw down lump sums and benefits from each smaller part at different times.
• An AVC PRSA operates under completely different rules. You must retire an AVC PRSA or AVC at the same time as you are drawing your benefits from the linked Occupational Pension Scheme.
• There's nothing stopping you from having several AVC PRSAs related to the one employment. It would be up to you to make sure that your total contributions don't exceed relevant limits. But you still need to retire them all at the same time.
• @CharlieMac has a query about holding two AVC PRSAs for a different reason - not to retire them at different times - but to use one to buy additional referable amounts in the Single Public Service Pension and another to invest in an ARF at retirement. To be honest, it's not something I've ever been asked to do for a client, so please don't take this as gospel. But I think it should be doable, largely because the transfer from an AVC PRSA into buying referable amounts would need to be done before retirement, while the transfer to an ARF would be done at the point of retirement. I don't see why there would be any issue with having two parallel AVC PRSAs. Use one to buy referable amounts a few months prior to retirement and the other to buy an ARF at retirement. But as I say, it's not something I've done in practice. I'd be inclined to ask the chosen AVC PRSA provider to give you something in writing that it's something they can accommodate, before you'd sign on the dotted line.

the complexity of pension options and rules never ceases to confuse me...

Don't get me started on a rant or we'll be here all day. I'm 36 years in this industry and I'm still learning. My biggest gripe is that I honestly believe that much of the complexity could be avoided. Instead of there being a single, coherent set of rules that govern all areas of pension funding, we have layers and layers of options and rules that don't interact with each other. And now the proposed Auto Enrolment which operates with a yet another completely new set of rules and doesn't interact or integrate with any existing pension schemes. Don't get me wrong - I'm aware that the continuing existence of such a complex web of regulation helps to keep me in a job explaining stuff to people, but I honestly believe that a far simpler, coherent pension strategy would benefit the country far more.

<Steps down from soap box...>