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Pension benefits at 50?

  • 27-03-2024 4:28pm
    #1
    DazzaMazza
    Registered Users, Registered Users 2 Posts: 28 ✭


    Hi all,

    Im working in the public service for the last 20+ years but I have a small pension pot (<13k) from a previous employment. Its now worth circa 13k down from 16k due to a pretty poor investment performance by the bond. Im not due to retire from public service for another 15+ years BUT I have recently been told that I can access a private pension once I hit 50 (which I now have!). This is tempting as we have some things we would like to do now in terms of the house and travel etc and the performance of the bond (and company) to date does not suggest that this bond will yield anything in the next 10-15 years. Plus I will have nearly a full pension from the public service at retirement time so accessing this now makes sense.

    From what I am reading, I can access 25% tax free and the remaining 75% will be taxed at the higher rate in my case. My only worry here is that any action I take now in terms of accessing this might impact on my future tax for the public service lump or pension?

    Two questions arise

    1. Are there any issues or implications from taking this now that I should be aware of? (pitfalls etc)
    2. Do I need to (should I) engage a pensions advisor for this type of process? Any idea on costs?

    Any thoughts or advice welcomed!!

    Thanks all

    Dazza



Comments

  • #2
    Hotblack Desiato
    Registered Users, Registered Users 2 Posts: 36,538 ✭✭✭✭Hotblack Desiato


    The whole idea of pension schemes is that you're not taxed on the way in, and hope to pay out while retired, on the lower rate of tax.

    Seems like you're looking to cash out at the higher rate of tax. Bad idea.

    A credit union or other loan to fund your home improvements would probably work out a lot better.

    Rein in the travel fantasies until you can either fund them comfortably from cash income, or have a retirement lump sum to splurge.

    In Cavan there was a great fire / Judge McCarthy was sent to inquire / It would be a shame / If the nuns were to blame / So it had to be caused by a wire.



  • #3
    Jim2007
    Moderators, Business & Finance Moderators Posts: 10,611 Mod ✭✭✭✭Jim2007


    Are there any issues or implications from taking this now that I should be aware of? 

    Very much so, your lack of understand of financial planning to start with!

    You state that this pension fund is underperforming, but provide not evidence of this. Pension funds move up and down several times over their life time and yours has over 15 years to run, so the fact that it dropped 3k has no context. If you said something like the benchmark on this fund was 8% and it has consistently under performed by 3% over the past five years, then I'd say OK they seem to know what they are talking about…. So at this point from my point of view, you don't seem to have the skills or knowledge to make that call.

    Your statement that you'll have nearly a full pension on retirement lacks context. In my 30+years experience most people substantially under estimate the amount of money they will need in retirement. If you had some kind of financial plan with projections showing you are adequately funded, then it might be different, but at the moment I don't see any evidence of that.

    Before you do anything you need to sit down with an independent financial planner and assess your situation. It may well be that you are in a position to take this fund early, but it could also be that you actually need to add substantially to your savings for retirement and without out a plan you won't know that.



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