personal reirement bond for v short period.

[chanel]

I have a transfer benefit of 12k from an old pension scheme I was in from a few years in early 1990's which is now being wound up.
I do not want to transfer this to my existing pension scheme or to get a prsa. The default option is to take out a personal retirement bond (PRB) in an Irish Life consensus fund. I am just 10 months short of 50 so I just miss out apparently on a cash option. My three questions are:-
1. Can I merely "rest" this 12K in a PRB until I am 50 and then exit it and cash in? - or is it not that simple. (is their a minimum period I have to leave it in first?)
2. Can I take some of the amount as a cash free lump sum at 50 and if so what happens to the balance? - can I take it as a taxable lump sum?
3. What fees/charges can I expect to pay (just ball park)
Thanks for any advice.

 

[ClubMan]

The default option is to take out a personal retirement bond (PRB) in an Irish Life consensus fund.

You can also shop around for your own PRB/BOB to get the best deal for your specific circumstances.

 

[LDFerguson]

Hi Chanel,

1. Can I merely "rest" this 12K in a PRB until I am 50 and then exit it and cash in? - or is it not that simple. (is their a minimum period I have to leave it in first?)

You can transfer into an Irish Life PRB and draw your retirement benefits shortly after. To the best of my knowledge, Irish Life don't impose early exit penalties.

2. Can I take some of the amount as a cash free lump sum at 50 and if so what happens to the balance? - can I take it as a taxable lump sum?

Yes you can take some of the PRB fund as a tax-free lump sum. What happens to the balance depends on the original scheme. Were you a director of the employer? Does all or part of the €12,000 include AVCs? If No to both, you must buy an annuity (guaranteed pension for life) with the balance of the fund. The annuity rate at age 50 would be poor.

3. What fees/charges can I expect to pay (just ball park)

As the scheme is being wound up, it would be common for the scheme consultants to arrange transfers into PRBs on a "no entry charge" basis whereby the only ongoing charge would be the annual fund management charge. Check with the scheme consultants.

As the scheme is being wound up, you may also have options to transfer your fund into a PRSA which would have 100% invested with 1% annual management charge and a wider range of options at retirement. Again, check with the scheme consultants.

Liam D. Ferguson
www.ferga.com

 

[chanel]

Thats for reply.
Do you know if the tax free lump sum portion is a certain % or how is it calculated, and also excuse my ignorance but is an annuity the same as a prsa? Is there no way I can take a cash option on the balance?

 

[ClubMan]

is an annuity the same as a prsa?

No - an annuity is something that you can purchase with your matured retirement fund that provides you with a specific annual income in retirement. A PRSA is a specific sort of pension policy geared towards saving up the pension fund in the first place. In the past the only option available to those retiring was to purchase an annuity. These days there are more options. The Pensions Board website has some useful booklets and other info that might be of use to you.

 

[LDFerguson]

Do you know if the tax free lump sum portion is a certain % or how is it calculated

The method of calculating depends on whether or not you were a director of the employer company. It's either 25% of the fund (director and AVC funds only) or a multiple of your final salary in the company (not director - exact multiple depends on how many years you worked for the firm).

Is there no way I can take a cash option on the balance?

If you were a director of the company and meet certain other criteria, you can, subject to income tax. Otherwise no, you must purchase an annuity. Given that annuity rates are poor at a young age, it might be better if you postpone drawing your benefits until a later age, unless you're in need of the cash now.