Pension fund dilemmas.

recipio

So guys, I've reached the ripe old age of 60 and want to draw down my private pension fund.
Could some of you pension experts advise me. ?
1. My fund is with BOI lifetime. Do I have to stick with them or can I move to another company ?
2. The choice seems to be to buy an ARF or an annunity.It seems a no brainer as I want to pass the fund on to my kids when I kick the bucket.
What are the snags to look out for. ?
3. I read in the INDO last week that you need an income of 18K to buy an ARF.
Is this true and does it include the potential income from the pension drawdown.?
4. I'm fully retired and married. What are the tax implications.?
You would be justified in telling me to talk to my fund manager which I will do,
but I always feel they are trying to sell you their product ( apologies to any fund managers out there ) and I feel a little intimidated.
All advice gratefully received.

Kennie1

recipio wrote: »

So guys, I've reached the ripe old age of 60 and want to draw down my private pension fund.
Could some of you pension experts advise me. ?
1. My fund is with BOI lifetime. Do I have to stick with them or can I move to another company ?
2. The choice seems to be to buy an ARF or an annunity.It seems a no brainer as I want to pass the fund on to my kids when I kick the bucket.
What are the snags to look out for. ?
3. I read in the INDO last week that you need an income of 18K to buy an ARF.
Is this true and does it include the potential income from the pension drawdown.?
4. I'm fully retired and married. What are the tax implications.?
You would be justified in telling me to talk to my fund manager which I will do,
but I always feel they are trying to sell you their product ( apologies to any fund managers out there ) and I feel a little intimidated.
All advice gratefully received.

1) You have what is called "open market option" This means that you can buy an annuity or invest in a AMRF/AR with whichever company you want.

2)It's not quite as simple of what snags to look out for, both have their merrits depending on your financial situation. If you invest in a AMRF/ARF there is nothing stoping you down the road from taking this money and buying a annuity where as if you purchase a annuity you are stuck with this decision. There are type's of annuity available that may give you best of both worlds and you should seek advice when choosing the best one for you.

3)IF your income is below 18,000 p.a. you would need of invest up to 119,000 in a AMRF until the age of 75. You can take investment returns (if any) as a income from this every year providing there is a minimum balance maintained equal to your original investment amount

4)Seek professional advice before you proceed with any decision. You can get this from either your product provider or a independant broker or perhaps both (compare notes) who should be able to provide you with relavant taxation info such as income tax/usc/prsi and inheritance tax implications.

In more general terms you should ask for a formal quote detailing up front charges and ongoing charges for both options. As you are only 60 and claiming your personal pension benefits you should also ask is there any exit penalities for claiming you pension before Normal Retirement Date. Read all information that you are provided with and if you are having any trouble with any of the gargon go back any ask your advisor to explain it again and again if need be you should also read all paperwork before you sign, dont worry about the advisor waiting for you if this takes an extra 15 minutes to do.

recipio

Thank you Kennie1.
I follow most of that. Why would anybody want to buy an annuity if it expires on the death of your spouse ( assuming I will expire before her.) I simply can't
accept that I hand over my lifetime savings to an insurance company.
I'll see what my pensions adviser says,sign nothing until I've analysed everything in detail.
Do I understand that I can take my fund elsewhere to get a better deal ?
Lastly I know the management charges mount up every year and are a significant part of any decision.

FernandoTorres

You should definitely go to an independent advisor given that it's such an important decision. When it comes to annuities and ARFs it very much pays to shop around so dealing with a tied advisor is not a good idea.

Browney7

recipio wrote: »

Thank you Kennie1.
I follow most of that. Why would anybody want to buy an annuity if it expires on the death of your spouse ( assuming I will expire before her.) I simply can't
accept that I hand over my lifetime savings to an insurance company.
I'll see what my pensions adviser says,sign nothing until I've analysed everything in detail.
Do I understand that I can take my fund elsewhere to get a better deal ?
Lastly I know the management charges mount up every year and are a significant part of any decision.

You take on a good deal of risk when you take out the ARF. Investment risk and living till a ripe old age and running out of money being the main ones (this is why the gov insists on an AMRF if income less 18k). Youll have to take a deemed distribution of at least 5 percent each year for tax reasons. You should be able to get 100% allocation and a management fee of around .75 to 1%.

I'd recommend a fee based financial adviser here. Might cost a few hundred up front but will probably write any contract on a nil/reduced commission basis and youll more than save this in long run. You can always move your Arf around also but be wary of surrender penalties

recipio

Thanks guys.
I will certainly go to an independant financial adviser.His fees are a nothing compared to the potential loss of income if I sign a bad deal.
The advice is appreciated.

Jim2007

recipio wrote: »

Why would anybody want to buy an annuity if it expires on the death of your spouse ( assuming I will expire before her.) I simply can't accept that I hand over my lifetime savings to an insurance company.

At the end of the day, it is all about risk and return. Ignoring all the tax and other legal rules, it boils down to this, as I see it:

With an annuity you are buying a guaranteed income stream over the remainder of your life and that of your spouse, if you live longer than what the seller of the policy expected, they loose, if you live for a shorter period they win. The big risk here is that purchasing power of your income will be reduced over time as a result of factors such as inflation.

The alternative is try and live of the gains generated by investing the pension amount in some form or other. People who go this route are exposed to two main risks: the the investment will not generate sufficient income and that they may suffer a capital loss, very often the two are combined. The result is that you end up having to consume more of your capital sum to make up for the income loss!

I would not be at all concerned what happens to the capital sum after we die - it is more important that my wife and I can live comfortably during our retirement, without being over worry about our finances. So I would be looking for a good reason not to go with the annuity option...