Do I have to draw down the lump sum from a DC pension when I retire or can I drawdown the lump sum in instalments.
If I have to drawdown on retirement how long after retirement have I got.
Generally, yes. Once you leave (retire) employment you can exercise your options whenever you wish (the scheme become “paid up” until you draw down the benefits). This may be subject to the scheme rules, but once you exercise your options you must do so for all benefits.
But you must exercise your options by age 70 at the latest.
If you meet the eligibility criteria for a transfer to a PRSA you could potentially establish a series of pension pots and access these sequentially.
For example let’s say you have €1m in a pension fund
You transfer this into 5 contracts
You access the first one
You have €200
So your tax free cash is €50
You have €150 to buy an annuity or an ARF
The remaining €800 is untouched.
Let’s say you leave these until you get back to €1m
You now have 4 plans untouched worth €250k each
Tax free cash on plan 2 is 25%
And so on.
You can do this until age 75
Things to remember
Once you have taken €200k the excess tax free cash is now taxable at 20% so you need to consider your gross taxable income overall.
Also in the example you would have used €1.2 M of the lifetime allowance so you need to keep ans eye on the cumulative balance to make sure you don't go over €2m