Q – I am retiring 9th January next and my own pension fund is currently 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 ? What are the procedures if I do decide to take it ? Pat – Kildare
A – Thanks Pat. 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 on the date of retirement that never changes and guaranteed until you die with generally the first 5 years guaranteed even if you do die ) where you could at current annuity rates expect a monthly income of c. € 440 and that’s taxable ! 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 partner first, your children second and finally to your estate. You MUST though take out 4% each year from the fund from age 60 – called imputed distributions – and this is also taxable. 5% from age 71. Therefore between the withdrawals and annual management charges your fund needs to be making or earning at least 5.5% each year, 6.5% from age 71 otherwise the fund could run out. Bear in mind the average annual stock market growth between 1991 and 2020 was 10.72%. 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 plus you are maximising your tax relief available for your age and income on your pension contributions. Email me for details.