Recommendation on pension options on Redundancy

[efm]

Hi All,

Have looked at the other threads on this subject but can't see a similar question.

Scenario: Person being made redundant after 16+ years. Settlement fig (incl Statutory and before tax) is €100K+. DB pension scheme preserves tax free lump of €64k on retirement (2034) with a NPV of €8,100.

Should person elect to take tax free lump now and get an extra €8,000 now or wait and be able to get €64,000 once reaching retirement ? Money is not "needed" for anything at the moment but would be spent if available !

Can anyone help or should a professional be consulted ? - if so who ? - accountant / tax advisor / redundancy specialist (is there such a thing) ?

Thanks in advance

 

[shipibo]

Is this contrib or non-contrib ???, can you contact the company that hosts the pension , and ask for options with your specific scheme.


You could contact an actuary, usually financial consultants also, or maybe a phonecall to Mercers, March Finance may help you out.

 

[efm]

Hi Crumdub,

Thanks for the reply - the pension is non-contributory but I don't know enough about pensions to know what difference that makes !

Is the risk to waiting until retirement age and getting €64k tax free that €64k may be worth very little then depending on inflation rates ?

As a comparison 28 years ago in 1978 £8k would be a fortune (you could buy a house with it) but now €64,000 doe not have the same spending power as €8k 28 years ago

 

[darag]

Hi emf. Are those amounts guaranteed? Is it an all or nothing option - i.e. take the 8.1k now or else you have no access for 28 years? Basically they are offering you 7.66% annual return over the 28 years. If you don't need the 8k now, you need to ask yourself if you could achieve better by investing it in something else. Personally, while 8% looks very attractive in these relatively low inflation times, the fact that the money is tied up for 28 years would turn me off a bit. I'd be inclined to take the money and put it into a low-cost index tracking fund or a global type ETF. Over the 28 years you should (no guarantee) do a bit better and also you'll be able to access it at any time if the need arises.