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Q. I am a self-employed trader and will be 60 next July. I do not intend retiring until I am at least 65. I have a pension fund, built up over 26 years which is currently worth around €156,000. I am still paying monthly contributions to my pension fund. I am told that I can cash in this pension fund when I reach 60.
What are my options if I cash it in next year when I turn 60 ?
There are a number of options available to you in relation to your (personal) pension fund when you reach 60:
As you state, you can encash your pension fund at 60. Under current legislation the earliest that an individual with a personal pension fund can access this is at 60 (unless in the case of ill health). If you decide to access your pension fund at 60 you can take 25% of the pension fund as a tax free lump sum, up to a maximum of €200,000.
Based on the current value of c. €156,000, your tax free lump sum would be €39,000. With the balance of c. €117,000, you can either :
Buy an annuity (income for life) from one of the insurance companies or
Invest the balance in an Approved Retirement Fund (ARF) which you own and can access. However, if you do not have a separate pension income of €12,700 per annum, then the first €63,500 of the balance must be invested in an Approved Minimum Retirement Fund (AMRF). There is no access to the capital in the AMRF allowed until you are 75.
You don’t have to cash in your pension fund at age 60 and you can continue to contribute to your pension until you decide to encash it. You will continue to receive tax relief on future contributions and any growth or return earned will not be subject to tax while it remains invested in your pension fund. You must access your pension fund by the time you reach 75 years of age.
Given that you have stated that you do not plan to retire until you are at least 65 it would probably be better, in your particular circumstances to continue to build up your pension fund to avail of the benefits of tax relief, tax free growth and increase your tax free lump sum on retirement.
However, it’s recommended that you should consult an independent financial adviser like Money Plus to ensure you get the most suitable advice relevant to your particular circumstances. In this regard Belinda McCauley and her colleagues would be delighted to assist you. Belinda’s contact details are : 086-7847827/071-9194000 or email: [email protected].
MoneyPlus are experienced investment and financial brokers and have been in the business of financial and investment planning for many years. They are dedicated in providing bespoke financial planning advice to clients. If you would like further advice on the above or any other financial information please contact Belinda McCauley in our Boyle office on Bridge Street on 071 9194000 or [email protected]
Boyletoday.com/MoneyPlus accept no responsibility for any decisions taken as a result of advice provided in this column. A reliable recommendation can only be made following a full detailed consultation taking an individual particular circumstances into consideration