Pension Advice in Ireland

This is the big question. After all those years of contributing to your retirement fund, finally, the time comes to choose your retirement benefits. If you retire at the normal retirement age (usually age 65, depending on your plan rules), the pension fund you have built up over the years may provide the following options.

1. Cash lump sum and/or
2. Annuity and/or
3. Approved Retirement Fund (ARF)

An annuity is a contract with a life assurance company that will pay you a regular pension income for the rest of your life in return for you paying them a lump sum when you retire. The amount of pension income (annuity) you receive will depend on many factors such as the size of the lump sum, annuity rates at the time, your age, whether it is payable for a set period and/or includes a dependant’s pension and state of health.

An Approved Retirement Fund is a personal investment fund where you can keep part or all of your pension invested as a lump sum after retirement. You can withdraw from it regularly to give yourself an income. It also enables you to pass on the remaining value of your fund to your dependents when you die. There are eligibility criteria and not everyone can access the ARF option. When you die, the remaining value of your ARF is available and can be left in your will as part of your estate. The proceeds can also be transferred into an ARF in your spouse’s/civil partner’s name.

If you must retire early due to ill health you may be able to take your pension benefits as soon as that happens. If you are a member of an Occupational Pension Scheme the Trustees of your Scheme will have to sign off on your ill health. If you are a member of a Personal Pension or PRSA your ill health claim will need to be agreed upon by the Life Assurance Company.

There will be limits as to how much you can contribute to your pension plan, depending on the type of plan you have. However, in all cases, there is an overall standard pension fund threshold of €2 million. We recommend that you seek professional financial advice if you wish to maximise the value of your pension fund before retirement.

Normally your pension will cease on your death unless you have purchased a pension which is payable for a minimum period even in the event of death.

Yes, Pension payments are subject to income tax at your marginal rate and USC deductions under the PAYE system. PRSI (up to age 66) may also apply. Your insurance company will make these deductions at source based on your rate of income tax and will remit them to the Revenue Commissioners on your behalf.

Not necessarily, you may be able to purchase your pension from any provider. You should check if there is an “open market” option available to you and if so, speak to your Independent Financial Adviser.