Members of a Defined Contribution Occupational Pension scheme have, once they leave this employment, the following 4 options with regards to this pension
Leave their pension invested in their previous employer’s scheme and retire it under their pension scheme rules
- Access to this pension is limited to the normal retirement age of the
scheme (usually 65).
- There is limited control and choice in where the pension funds are invested.
- In the event of death, it can be difficult for the family of the pension owner to locate/access to a previous employment pension, particularly if the death is sudden.
Transfer their pension to their new occupational scheme with their new employer.
- Retirement age is restricted here also, in line with new scheme rules (65 – 68).
- There is limited control and choice on where the funds are invested.
- The Death Benefit has usually correlated with the salary the employee is on (e.g., a death benefit if twice the salary, etc if an employee dies in service).
Transfer the full Pension Value to Personal Retirement Bond in their own name.
- They will have the option of accessing your pension from age 50 onwards if you wish.
- They will have full control over the investment options
- Access to these pension funds can be gained from age 50 onwards.
- In the event of death, full fund values of the Pension Bond are payable to the individual’s family/estate.
Transfer your pension funds to Personal Retirement Savings Account (PRSA).
- Access is restricted to age 60 onwards
- They have full control over their investment options
- In the event of death, full fund values of the PRSA are payable to the individual’s family/estate.
When you do decide to retire and access the funds from either a PRSA or a PRB,the funds are received as follows
- 25% as a Tax-Free Lump Sum
- The balance (75%) invested in an Approved Retirement Fund (ARF) which is taxable as income once withdrawn.
The lump sum is received tax-free whereas the funds withdrawn from the ARF are taxable as income – Liable to PAYE, PRSI (until age 66), and USC.
This ARF income can be received monthly/quarterly or annually etc. A minimum withdrawal of 4% is compulsory from age 61, but you can withdraw as much as you wish from this pot of money at any time.
However, all withdrawals are taxable so it is important to be prudent when withdrawing this income to avoid paying unnecessary income tax etc.
Accessing your pension fund:
On death, the full fund value is left to the pension owner as an inheritance