Small pensions advice

K

Knowledgequest

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Hi... I have just finished working a few weeks ago age 60 and I am going to retire and live off my widows pension and savings until pension age. I have a couple of very small pensions, one is a PRSA with €10000 and the other is private pension with €20000. I am thinking of taking these small pensions as trivial pensions if possible and paying the tax on the balance of these after taking the 25% tax free sum. My reason for considering this option is that I could have more control on the lump sum and use it as required. I am quite good handling money so I would be able to budget it over the years.

So my question is what tax rate would I pay on the taxable part of the €30000 ?

Thanks
 
Assuming that you are entitled to Personal and PAYE tax credits of 3750 euro.
You can earn 18750 euro per year before you enter the income tax net.
This means that you will have some capacity for extra tax free income after taking your widows pension.

If you are liable for any income tax by taking all your taxable pension income in one year, you could instead buy an ARF and take your pension money over several separate years, to take your total yearly income up to the 18750 euro level.

There is total flexibility in the amount of ARF drawdowns per year.
By doing this you could avoid paying any income tax on your private pensions.

If you want to minimise the ARF fees you could take out an execution only ARF.
The previous poster Gerard Sheehy provides this service at. prsa.ie
 
Last edited:
Thanks for the info guys.... I get 5500 in tax credits as I also receive the The Single Person Child Carer Credit. My taxable income will be approx €17000 this year.
Would this mean that I would get the first €10500 of the €22500 lump sum tax free and then pay 20% tax on the remaining €12000 ?
 
Yes you have 10500 spare tax free income per year and you would pay 20% on the remaining 12000
if you set up an ARF with the remaining 12000 and draw all of this down next year you could avoid paying tax on the 12000.
 
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