Pension Query Cashing in 25% of my PRB.......options ??

Macker1

Folks,

Hopefully I can get some advice or at least some understanding regarding my query.

I invested a sum of money back in 2005 in a Personal Retirement Bond which has grown quite well over the years.

The bond at present is worth €71k or so with the 25% Lump sum worth around €17.7k.

I don't want to transfer into my current pension as I want to access a lump sum for personal reasons.
If I take the lump sum it leaves a remainder of €53.6k which I would like to re-invest so it can continue to grow and this is where I get a little confused.

I don't want to commence with a pension payment (not even sure if I can as I'm not retired and won't be for another 15 years)

My options listed then mention that I could take out an ARF if I have a guaranteed pension income of €12,700 or over.
If I don't the first €63,500 must go in an AMRF. It does mention that it mightn't cost the full €63500 to purchase the guaranteed income for life in retirement of €12700 pa.

Am I correct in understanding that the amount it costs to purchase the guaranteed income for life in retirement of €12700 pa would come out of the €71k so reducing the lump sum amount.

Does my other pension in current job to which I'm currently contributing a decent amount into (22%) with the fund currently worth €131.7k have any bearing on this situation ???

Finally does the state pension come into play if at all in affecting my position ???

Apologies for what might seem silly questions but I really appreciate all info/advice.



Any advice greatly appreciated.

3DataModem

Macker1 wrote: »

It does mention that it mightn't cost the full €63500 to purchase the guaranteed income for life in retirement of €12700 pa.

12,700 income for life will cost a 60 year old 400,000 right now.

ANXIOUS

Call up whoever the policy is with and speak to someone.

They'll talk you through your options, it seems you're getting confused with a few technical parts.

Macker1

Many Thanks for responding.....

In nutshell to see if I've got this right

Bond is worth 71k
I would like to access a lump sum of 25% but this won't be possible as I would have to invest a minimum of 63.5k in a AMRF which would leave around 7.5k cash lump or if I understand correctly I could just invest the 53.5k now in the AMRF and then top it up at a later stage to the required 63.5k

Am I right in understanding that the funds in the AMRF will continue to grow like it has been doing in the PRB ?

The other option quoted was to take the full 25% circa 17.7k and use the remainder 53.5k to secure a yearly income for life that the provider states would commence this month. The figures mentioned for this are as follows

Standard Pension with no yearly increases is €1,323.80
Standard Pension with 3% yearly increase is €648
Inflation Protected Pension is €591.70

These I expect are obviously annual payments given that only 53.5k is funding the pension ??? This 53.5k isn't an investment so wouldn't be growing

I wish the paperwork explained things more clearly. I really appreciate the time you are taking to respond.

vkus6mt3y8zg2q

Macker1 wrote: »

Many Thanks for responding.....

In nutshell to see if I've got this right

Bond is worth 71k
I would like to access a lump sum of 25% but this won't be possible as I would have to invest a minimum of 63.5k in a AMRF which would leave around 7.5k cash lump or if I understand correctly I could just invest the 53.5k now in the AMRF and then top it up at a later stage to the required 63.5k

Am I right in understanding that the funds in the AMRF will continue to grow like it has been doing in the PRB ?

The other option quoted was to take the full 25% circa 17.7k and use the remainder 53.5k to secure a yearly income for life that the provider states would commence this month. The figures mentioned for this are as follows

Standard Pension with no yearly increases is €1,323.80
Standard Pension with 3% yearly increase is €648
Inflation Protected Pension is €591.70

These I expect are obviously annual payments given that only 53.5k is funding the pension ??? This 53.5k isn't an investment so wouldn't be growing

I wish the paperwork explained things more clearly. I really appreciate the time you are taking to respond.

Yes funds would grow tax free in an AMRF same as within your PRB. €63,500 is the max that can be put into an AMRF not the minimum. As long as over 50 you can access your lump sum from the PRB and balance can go into an AMRF.

coylemj

Macker1 wrote: »

Am I right in understanding that the funds in the AMRF will continue to grow like it has been doing in the PRB ?

In general terms, yes. They get the same treatment regarding tax in that the fund does not pay tax on dividends and capital gains. But as with any funds, whether they grow and by how much will depend on where the money is invested.

As you'd have reached a certain age with money in an AMRF, you'd need to take a more cautious approach than someone in their 30s and 40s so it would be prudent to put the money into relatively conservatively managed funds.

Heres Johnny

The 12,700 guaranteed income for life is nothing to do with value of your current pension funds.
Since your fund is probably a DC fund you have no guaranteed income for life, regardless of whether the fund is 50,000 or 500,000

It is to do with state pension/other guaranteed pensions, if you have these you can put all your money in an ARF and take it out whenever you want it

If you dont you put 63,500 in an AMRF which you cant get until 75 and use the rest in an ARF now as you see fit.

Real life example I did for my own father earlier this year, his house unfortunately burned down and he needed funds from his pension funds

He is 66 this year and is in receipt of the state pension since January (approx 13k)
He has a pension for life from a former semi state body worth 19k a year guaranteed, this is known as an annuity
So he has a guaranteed income for life of 32k

He also had 100k in 2 separate DC pension funds
He took 25k tax free as everyone is entitled to do
As he has a guaranteed income of 32k a year he is entitled to put the other 75k into an ARF and cash it in immediately as taxable income at his marginal rate

If he did not have this 32k guaranteed income he would have to put 63,500 into an AMRF (until either he reached 75 or he reached the 12,700 income) and 11,500 into an ARF which he could take

He hasnt taken the 75k yet as we are trying to do it tax efficiently and also to see what he needs over and above the insurance settlement as he is making some substantial improvements to the property while it is being renovated which the insurance will not cover.

So, hopefully this explains it, the ARF and AMRF thing confuses a lot of people

Macker1

I spoke to the provider and I got some clarification pretty much in line with your advice and thankfully my thinking

The best option and most likely for me is to take my 25% as a lump sum and then re-invest the remaining 75% into a AMRF which will hopefully continue to grow until I have to re-visit upon my retirement. I would imagine that I can choose how aggressive / passive the investment strategy will be with the obvious plan to reduce the risk in the latter years.

Would I be correct in saying that when I get retire the AMRF may well have increased in value to exceed the value of €63500 and therefore could covert over to an ARF which would allow greater access to my funds.

Am I right in saying that both the AMRF and the ARF are investment policy's with the main difference being access is more restricted with the AMRF (4% withdrawal once per year)

vkus6mt3y8zg2q

Macker1 wrote: »

Would I be correct in saying that when I get retire the AMRF may well have increased in value to exceed the value of €63500 and therefore could covert over to an ARF which would allow greater access to my funds.

Am I right in saying that both the AMRF and the ARF are investment policy's with the main difference being access is more restricted with the AMRF (4% withdrawal once per year)

AMRF only converts to an ARF if you have the required guaranteed income of €12,700 pa (under current legislation) or when you reach 75. Doesn't matter if the AMRF grows in excess of the threshold of €63,500.

Yep AMRF and ARF similar with main difference the restriction on withdrawals with the AMRF.