Can You Have Too Much Pension?

Don't forget that you pay tax on all pensions including state pension when you retire
All such pension income is assessable for tax.
Whether or not you pay tax and how much depends on your personal circumstances and overall income.
 
Great question

"
The only other option would be to start drawing down from some of our pensions a bit earlier and I am not sure that is the right thing to do?
"

I think the consensus is by drawing the minimum so that you pay zero tax is best option. Two people, married couple can draw down maybe 32k while paying zero tax. Makes sense?

Second thing I would suggest is how you invest your ar pension (and arf).
You need to invest wisely, go top class advisers. Pay a few bob.. Money well spent.
 
"you must withdraw a minimum of 4% of your fund each year from the year you first reach 61"


And say your fund after taking cash is 650?
Then 4% is about 26k. Not much tax payable.
If you keep your cash savings you might be more adventurous with investing in equities.
 
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@DeepThinker, is your current pension pot all in the one - current employment pension scheme ? If you have some of the 725k pot, spread across more than 1 scheme, (or a personal retirement bond)you can hold off on, on actioning the ARF/TFLS on one or more of them.

If for example, you had 250k from a previous employment DC scheme(or a personal retirement bond), and 475 k in current employment scheme, then, you could start drawing on one of these only, on your retirement at age 60, the 4 % imputed minimum, only applies to pension pots which have been transferred into a “live” ARF”.
This gives additional flexibility, in having more control of drawdowns, and more control of delaying drawdowns, until later on, if that is required, it also adds additional growth potential, as delaying drawdowns, can mean potential additional growth in the funds.
 
Why not move everything into a PRSA and phase retirement?

A PRSA can be split. So you can have both pre and post retirement “ pots”

Say you get the fund up to €1m

You can retire say €100k
From this pot you can take 25% lump sum

The first €200k is free of tax so this is a tax free lump sum.

You then have €75,000 in a vested or retired PRSA and €900k untouched.

You can draw income from the vested part at any rate you want (subject to minimum distributions at 61 etc)

So you might choose to take an income to make use of exemptions and reliefs. Say €25kpa

So this would last about 3 years.

You then repeat the process

Each chunk of pension has its own lump sum allowance of 25%.

The untouched pension part grows free from personal taxes and is treated as a return of fund on death whereas a spouse or civil partner will take over the vested part on death.

This is just a more flexible and tax efficient way of planning. Rarely see it discussed

Marc Westlake CFP, TEP, APFS, QFA, EFP
Chartered, Certified and European Financial Planner
Registered Trust & Estate Practitioner
Everlake
 
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Just a side note, do you think future governments might change the 25% TFLS?

IFS calls for government to scrap 25% tax-free lump sum​

 
Just a side note, do you think future governments might change the 25% TFLS?

IFS calls for government to scrap 25% tax-free lump sum​

They already have.

There was no cap on pensions
Then a 5.4M limit
then a 2m limit
Tax free lump sums used to be uncapped
then capped at 200k

Constant changes in the rules is a feature of retirement planning
 
They already have.
Surely this is misleading?
Isn't the de facto case that one can take the lower of 25% or €200K as a tax free lump sum?
I can imagine that the €200k limit may be irrelevant to many retirees.
 
Just a side note, do you think future governments might change the 25% TFLS?

IFS calls for government to scrap 25% tax-free lump sum​

In a word no, the civil/public service would have to do similar, and I don't see them giving up that benefit.
 
That’s really useful info. I had thought you had to draw the income of 4% if you took the lump sum once you were over 60. By not doing so, it is not a “live ARF”, as you say.

Thank you.
 
This looks very straightforward and compelling. Assuming a 1M pot and retiring at 60, the key attraction for me is that it confines the imputed distribution to a smaller amount and also allows you access tax free lumps sums at different times.
For example, you might want to give 75k to both daughters for house deposit. There's a few years difference between when they need the money. So you could retire 300k at different points in time.
Is it as simple as that? You just convert a buy out bond to a prsa, and that frees up this approach? Any other considerations with converting buy our bond to prsa?
 
Legislative cul de sacs unfortunately

You can’t transfer from a buy out bond to a prsa

You (currently) need to go up to an occupational scheme and back down to a PRSA.

This is just a nonsense so likely to be cleaned up with a pension rationalisation which would also probably do away with ARFs
 
That's basically what I did last year and I now have 4 PRSA contracts (all with the same provider) that can be retired at different times if necessary. As @Marc says though, you can't go from a BOB/PRB (or RAC?) to a PRSA. That's why I still also have a PRB and a RAC! But that's just more flexibility.
 
You can transfer benefits from an RAC to a PRSA alright but PRSAs are often more expensive than RACs (or PRBs for that matter).
Thanks for that clarification.
As it happens my PRB (0.45%) and RAC (0.50%) both have slightly lower charges than my PRSA(s) (0.67%).
The PRB and RAC are also subject to an annual policy fee of €22.50.
 
If a person has a prb valued at 450k and a prsa valued at 400k, can both of these pensions be retired and 200k TFLS taken?
 
If a person has a prb valued at 450k and a prsa valued at 400k, can both of these pensions be retired and 200k TFLS taken?
Ordinararily, yes.
But not if you're still in the employment that the pensions relate to.
 
Are you sure the PRSA (attached to current employment / company) cannot be retired and take the 200K TFLS and transferred into a vested PRSA? and keep working within the company?