Q – I am retiring 8th January next month and my own pension fund is worth c. € 175,000. I am only 62 now and wondering should I find some little job and hold off from cashing in my pension til I need it or til I reach normal retirement age ? What are the procedures if I do decide to take it now ? Peter – Kildare
A – Thanks Peter. Let me bring you through what’s going to happen. Firstly if this is your only pension, you can take 25% of it tax free – that’s € 43,750. You can do one of two options with the balance – € 131,250. It can either be invested in an annuity ( fixed interest rate set at retirement date that never changes and guaranteed until you die with generally the first 5 years guaranteed even if you do die.. after that the insurance company keeps the balance ! ) where you could at current annuity rates expect a monthly income of c. € 440. The second system is called the Approved Retirement Fund (ARF), introduced in 1999 which allows you more control over your fund and if you die at any time whatever balance that is in the fund goes to your spouse as if its his / hers, or your children ( they pay 30% tax and it’s outside inheritance ) or finally if no children or spouse your estate. That 75% balance goes into the ARF directly but you MUST withdraw 4% each year – called imputed distribution – up to age 71, over this age it is 5%. Therefore between the withdrawals and annual management charges you need to be making or earning at least 5.5% each year, 6.5% from age 71 otherwise the fund could run out. It’s not all that complicated but you do need a good adviser. Me ? I would work on for a few more years making sure that the fund is being properly managed and growth maximised. Email me for details.