Pension Tax-Free Lump Sum at 50 Ireland – All You Need To Know

So how do you access your Pension Tax-Free Lump Sum at 50 Ireland? There are different types of pension plans in Ireland. In this article, I will explain the different types of pensions and then I will tell you how you can access the pensions early. I will also give a few tips along the way to make your pensions more accessible and help you get better control over your pension pot.

So you might be dreaming of paying off your mortgage early or treating yourself to the camper van of your dreams and a trip around Europe, or perhaps you want to give up work early and enjoy your freedom without the doom and gloom of bills hanging over your head.

Having a pension pot that is big enough first of all is key to these dreams. So what are the different types of pensions and what age can I access them at?

Pension Types and Early Retirement Ages

1)Personal Retirement Savings Account(PRSA): There are two main types, employer PRSA and personal PRSA. If you leave employment and are unemployed then you can access your employer PRSA from age 50. A personal PRSA is restricted to the age of 60

2)Personal Pension: A Personal Pension is only accessible from the age of 60

3)Occupational Pension: An Occupational pension scheme is dependent on scheme rules. If you leave the company and hence the scheme you can normally access the pension from age 50

It is important to note that you may be able to retire early due to ill health. This typically involves providing medical evidence of your condition.

Things to consider when accessing your pension early

1)Your pension grows tax-free so if you take your lump sum early you are essentially taking 25% of the fund which will no longer grow tax-free

2)If you leave for longer the tax-free lump sum will likely get bigger

3)There are two main options for occupational scheme pensions. Generally, you might take the higher tax-free lump sum of either 1) 25% of the fund value or 2) A lump sum based on your number of years of service and final salary. If you take a lump sum based on your years of service and final salary then there is a penalty applied for taking early retirement that reduces the tax-free lump sum. Note you can use your AVCs to correct this. Revenue will allow everyone to have a tax-free lump sum of 1.5 times their final salary if they have 20 years of service. So if you do get a reduced tax-free lump sum under the salary and service option then you can beef it up with your AVCs.

Tips to access your pension early

1) If you have a personal pension or PRSA that is restricted to age 60. You could consider moving it to an employer occupational scheme. If you then leave employment, you should be able to access all the benefits from age 50(make sure your employer scheme allows this)Top of Form

2) if you have a company PRSA you could stop working and access the pension from age 50. Once you have taken the tax-free lump sum there is nothing to stop you from going back to work.

3) If you have old occupational schemes, you should have them reviewed by a Certified Financial Planner. It may be advantageous to move into a buy-out bond(Personal retirement bond). Doing so normally allows you access to a much wider range of fund choices. (typically pension schemes are restricted to low-risk, medium risk and high-risk lifestyle funds. So normally there are only basic options in group occupation schemes) Moving into a buy-out bond will give you access to a wider range of funds which should help you achieve better returns in the long run. You then have control over when you want to access the pension(scheme rules carry over but typically it is age 50). If you move a defined benefit occupational scheme into a buy-out bond you will also increase your options i.e. get access to an Approved Retirement fund(ARF) and an option to a 25% tax-free lump sum.

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Finally, if you have any questions in relation to this or if you have any other pension query you can contact me at 015823524 or email me at sean@financiallife.ie

Thanks for reading.

Sean

Disclaimer: The information provided in this article is for informational purposes only and should not be considered financial advice. It is advisable to seek expert financial advice for personalized guidance regarding retirement planning.

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