Withdrawing Money from a Pension

Tipp Man

Can anyone explain the rules to me (in laymans terms) about withdrawing money from a pension before it matures.

A bit of background, i have been in employment for 7 years with a company pension, the vast majority of which was contributed by the company although i did make some AVC's. I would say at a guess that 90% was contributed by the company

I now wish to withdraw an amount (proably 75% of the total value) for personal circumstances, what are the rules for this and the tax implications?

Thanks

Ideo

This may be wrong, but you'll pay tax at 20% on the value of your contributions that you withdraw. I don't believe you can withdraw the employers contributions. I know if you were to make a refund of contribution on the whole pension amount that the AVCs would be returned to after tax of 20% and the employers conts would be returned to them. I guess the same would apply on a pro rata basis?

stepbar

You will not be able to withdraw your pension benefits until you retire. Normal retirement is usually between 55-65 (or in the case of professional sportspeople, earlier). However, there are provisions in terms of people who become incapitated due to illness or injury. If you are moving jobs, you can either transfer your pension to another provider or enact a buy out bond which will give you benefits on retirement from the scheme you are in. Your benefits are "frozen" per se.

If you're of retirement age, then you are allowed withdraw 25% of your pension tax free. A minimum of 63,500eur must be moved into a AMRF (Approved Minimum Retirement Fund) However, if you have an income of 12,700 upon retirement, this requirement is waived. You cannot touch the AMRF until 75, however you can withdraw any gains from it over the minimum level mentioned above. The remainder (Balance less Tax free sum and AMRF) is put into a ARF (essentially the same thing but you can withdraw funds anytime you like). ARF withdrawals are subject to tax (depending on an individuals suitation) and yearly imputed distribution charges (http://www.foresthill.ie/news/approved-retirement-fund-arf-imputed-distribution-requirement/)

This is all I can remember at the mo, there's so many more rules etc. TBH I would advise you go to your provider and ask for information.

stepbar

A good article on the matter

http://archives.tcm.ie/businesspost/2004/08/08/story215264408.asp

It covers the points although it's 5 years old.

Ideo

stepbar wrote: »

Your benefits are "frozen" per se.

That's not entirely correct. You can in fact seek a refund of contributions. OP, do you presently know the value of your pension? It might make a big difference as to whether it's even worth claiming a refund of contributions!?

stepbar

Ideo wrote: »

That's not entirely correct. You can in fact seek a refund of contributions. OP, do you presently know the value of your pension? It might make a big difference as to whether it's even worth claiming a refund of contributions!?

You can seek alright but you won't get any refund if the pension has been in force for less than 2 years. The rest I have explained. If you enact a buy out bond, the retirement benefits your pension fund would buy are frozen until retirement.

As the OP has been employed for 7 years, we can safely assume that he has been contributing for the majority of those years. Hence why I never mentioned a refund of contributions as it's not applicable. In short, he's very restricted in terms of what he can do.

Ideo

ahhh, thanks for clearing that up for me!

blowtorch

I have two of these. When I left my employers, I could not take out the contributions. However on reaching 50 years old, and having left these employments, I (believe) that I can cash in those Personal Retirement Bonds. On the Irish Life one they have a paragraph that states 'If you are 50 years of age or over you are entitled to claim your PRB, however please note that you must have left the service of the employer that the PRB is in respect of'

Hope that helps

the twc

stepbar wrote: »

You can seek alright but you won't get any refund if the pension has been in force for less than 2 years. The rest I have explained. If you enact a buy out bond, the retirement benefits your pension fund would buy are frozen until retirement.

As the OP has been employed for 7 years, we can safely assume that he has been contributing for the majority of those years. Hence why I never mentioned a refund of contributions as it's not applicable. In short, he's very restricted in terms of what he can do.

Sorry..maybe I'm miss-understanding this. If the pension has been in force for less than 2 yrs, then a refund is not possible... Since OP has been employed for 7 yrs, I would assume a refund IS possible???

stepbar

the twc wrote: »

Sorry..maybe I'm miss-understanding this. If the pension has been in force for less than 2 yrs, then a refund is not possible... Since OP has been employed for 7 yrs, I would assume a refund IS possible???

Sorry, typo on my part. A refund is possible if the pension is in force less than 2 years.