If you retire at 55 you get an actuarially reduced pension straight away. If you resign you get a preserved pension which you draw down from 60. The preserved pension is of course greater.Are there any advantages or considerations.between retirement over resignation at 55?
Edit: no, as clarified below.I have some funds in an AVC which I would like to partially draw down next year at 55. Is this possible and would I need to retire to do so?
If you want to take an actuarially reduced pension you take the Cost Neutral Early Retirement option. If you want to defer the drawdown and take your full pension entitlements at 60 you resign.Are there any advantages or considerations.between retirement over resignation at 55?
I plan to work on a contract/agency basis until aged 60 and then defer pension until then.
No. Not with an AVC linked to a defined benefit pension. If you want to access it at 55 you need to go for CNER.I am looking at retire/resign at 55 and defer benefits until 60?
Re AVCs - is there an option to make a partial withdrawal (of 25%?) at 55 in advance of my deferred pension lump sum at age 60?
CNER at 55 with a normal retirement age of 60 results in getting about 78% of the preserved pension and 91% of preserved lump sum.What is the reluctance to access the CNER option @ 55. You will get 5 more years of your pension. You can work as well. Is there much of a difference between CNER and preserved options ?
So assume the OP starts consulting at age 55 and works on a contract/agency basis for five years to get at last 260 contributions (Class A or Class D). He then draws down at least €5k a year from the AVC pot from age 60 and makes Class S PRSI contributions of €500 a year for six years.I take it you have been paying modified rate PRSI (D or B)? If so, you can become eligible for a partial State Contributory Pension by paying full rate contributions after you retire/resign. You need a minimum of 260 contributions (5 years) for a pro-rata pension (calculated on the basis of your combined full rate and modified rate contributions
So assume the OP starts consulting at age 55 and works on a contract/agency basis for five years to get at last 260 contributions (Class A or Class D). He then draws down at least €5k a year from the AVC pot from age 60 and makes Class S PRSI contributions of €500 a year for six years.
This gets him 11 years full rate contributions (Class A/S) and 30 years modified rate contributions (Class B or D). If I read the rules correctly he then qualifies for 11/40 of a full state pension of €252 a week/€13,800 a year, so about €3,800 a year from 66.
My Retirement salary is approx 90k x 30 years service.
No, CNER or Preserved Pension should not make a difference in this scenario.*In the scenario above I don't think it matters whether he takes CNER at 55 or draws pension from 60*
Speaking from experience, i woud take CNER now at 55, and not preserve the benefit till 60. You say you plan to work again so fine, you have paid into a pension for 30yrs, might as well take benefits now as one never knows what health issues etc ( hopefully none) that may arise, and enjoy your semi- retirement
He could drawdown 5000 euro per year for two years and then make voluntary contributions based on the S class contributions at a cost of 500 euro per year.but it would still leave him with an insufficient amount to maximize Class S after 60 in the way you suggest.
"Cost neutral" calculations are done by actuaries who are employed by the state to ensure that it doesn't lose out, so it will never favour the retiree.I don't know the actuarial calculation but I suspect it would favour the Preserved Pension at 60 option.
CNER was strongly advocated by the PS unions and came in at the time of Partnership about 20 years ago. I'd guess they had quite a strong input into the actuarial process at the time as well.
Indeed a 55-year old is expected to live until 83 now.In this example the crossover age for advantage to the Preserved Pension over CNER would be approximately 78 (below current average life expectancy).
I hadn't realised that they used a different actuarial adjustment for the SPS. It's a bit of a mess.SPS may differ from the traditional PS pension as it was launched in a different economic era.
SPS may differ from the traditional PS pension as it was launched in a different economic era.
Here is a crude calculation based on a traditional pension (not coordinated). I am omitting the lump sum and future indexing for convenience.
John is retiring at 55 with 30 years service on a pensionable salary of €80,000. His preserved pension is €30,000.
Lets first say he pops at 68. If he opts to take this Preserved Pension at 60 his annual payments will have amounted to €240,000. If he had instead opted for CNER at 55 his annual pension of €23,400 would have amounted to €304,200. So an advantage of €64,000 for CNER.
Now say he lives until 88. His Preserved Pension payments would then cumulate to €840,000. If he had taken CNER his annual payments would accumulate to €772,000. Now it is advantage €68,000 to the Preserved Pension. A reverse in financial fortunes!
In this example the crossover age for advantage to the Preserved Pension over CNER would be approximately 78 (below current average life expectancy).
The Preserved lump sum is also more favourable than CNER - apart not being actuarially reduced, it is calculated in relation to the salary pertaining to his grade at 60 instead of 55 (when he actually retired/resigned). And salary-linked pension increases after retirement are also likely to favour the Preserved Pension option.
In general for traditional PS pensions the financial balance between CNER and Preserved Pension will shift gradually and linearly with increasing survival age. Fortunately for the government the actuarial tables have not been re-adjusted to reflect this increase in life expectancy.
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?
We use cookies and similar technologies for the following purposes:
Do you accept cookies and these technologies?