Pension withdrawal

ZigOrZag

Hi

I hope someone on here can help me.

I was investing in a work scheme pension for approx 3 years while I was employed by a company. I left that company to go travelling last August so obviously the payments ceased.

I received a letter from the pension provider re my options - 1. Transferring the money to another pension scheme. 2. Drawing down my pension at it´s current amount. 3. Leaving it idle until I retire / start a new pension scheme.

I am returning to college in September and will be approx 3 years in education - at which point I will be (hopefully) employed in the public sector.

I will need to take out some student loans to support myself when I am in college and I was considering drawing down my pension to cover my education costs instead of being lumped with loan repayments.

Is this a good idea? I understand that I will be starting my pension from scratch in a few years but pensions in the public sector are pretty good so I feel I should be OK in that regard.

I´m out of the country at the moment but plan on seeing a financial consultant of some sort when I return. I just want to have an idea where I stand until I can do that.

Thanks

Bren157

Hi. I do not think you can cash in your employers payments into the pension until retirement age. Maybe you can cash in any portion that you paid directly but you will pay tax on it. If the pension value is not significant then it would have little impact on your retired income. And you have to live for now too!

FernandoTorres

If you were in the scheme for over 2 years you will not have the option to claim a refund of the amount. Usually you will only be able to claim the amount that you contributed so you lose the employer's portion. It will be taxed at 20%.

If over 2 years your only options are to leave it where it is, transfer to a PRSA/Buy Out Bond or a new company pension plan. If you need the money and you were in the scheme under 2 years I'd take the refund. You'll gain a bit if you got relief at the higher tax rate on contributing to it.

Bren157

I could be entirely wrong here so dont take my word for it. But I think in the past, if you withdrew within two years the cash was taxed at a flat 25%? Either way, if you got tax relief at the 41% when you invested, you still gain if you cash out (subject of course to the fund value itself) but if the flat 25% tax applies and if you got 20% relief on investing then not only will you lose your employer benefits but you also pay more tax than the tax credit you got initially. I guess the message here is do the maths first!

FernandoTorres

The tax is a flat 20% on the value of your personal contributions. Here is a summary: http://oneview.mercer.ie/leaving-employment/dealing-with-your-pension

Doesn't say the tax rate there but you can find it in the Revenue Pensions Manual.