Cashing in PRB while receiving Disability benefit.

septictank · 17-01-2022 2:58pm #1

55 year old Left employment due to disability 5 years ago and has a small retirement bond 40k sitting.

If cashed in will this effect the disability benefit claim (Earnings) and or will the PRB be taxed, if so at what rate.

Won't be going back to work because of disability.

Anything that can be done to receive the best outcome?

abff · 17-01-2022 3:08pm

abff · 17-01-2022 3:20pm

You should talk to your PRB provider to see what are your options. The likelihood is that you will be able to take 25% as a tax free lump sum, although a higher lump sum may be allowed if the PRB relates to membership of a company pension scheme. This will depend on your salary and service with the employer in question.

The balance may be below the minimum premium limit for an Approved Retirement Fund, although the existing provider may be prepared/required to waive any such limit. Purchasing an annuity would not make much sense as a huge chunk would be eaten up by charges and rates are very low at present in any event.

You could (or might have to) take the balance as a taxable lump sum. I think this would then be regarded as income for the current year and could affect your entitlement to disability benefit, if it is means tested. Your local Citizens Information office might be able to advise you in this regard.

septictank · 17-01-2022 3:44pm

Thanks for getting back to me so quickly. It was a company scheme but once left the company it then became his responsibility.

He hates the thoughts of having to go through all the red tape of doctors and so on to get the DB up and running again if it was cut due to tax on the PRB.

I thought Pensions were exempt to taxation or a large amount of it, 50%+ so about 20k to be taxed at 20% so 4k which could be claimed back the following year?

abff · 17-01-2022 3:51pm

Maybe I misunderstood your original question. Is the individual in question in receipt of State disability benefit or is he receiving an insured benefit related to his former employer? If the latter, then he is technically still in employment and can’t access his pension until he leaves. Although it may be possible to get the benefit assigned directly to him if the insurer agrees.

septictank · 17-01-2022 4:00pm

He took redundancy and left the job so is on unemployed DB from the state.

Thought he had to wait until 65, but could really do with the money now, I spoke with him and told him he could get some of it just how much I didn't know.

Says he will contact the broker but wanted to have some rough figures before hand and if there was a way to make it work best for him.

Cashing in PRB while receiving Disability benefit.

Comments