Pension Retirement Options

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Retirement Annuity
Retirement Annuity

Pension retirement options are the benefit drawdown choices your pension plan is designed to present once you reach retirement age. Once you reach this stage, you will have an important financial decision to make regarding your pension pot and how it could be best used to meet you and your family’s financial needs in the future. You won’t be eligible for a State Pension until you are 66 (that will rise to 67 from 2021 and 68 from 2028).

However, having your own pension plan gives you a lot more freedom. Most pensions allow you to take your benefits from the age of 60 (although some allow you to retire early from the age of 50).

Two of the most important factors you should consider benefits drawdown are the way in which you wish to use your accumulated fund to provide an income in retirement and whether you wish to pass the balance of your fund to your dependents after your death.

What you can do with the proceeds of your pension plan depends on which employment category you fall into and the type of pension plans you currently hold, PRSA, Personal Pension, Executive Pension or Group Occupational Pension.

Depending on your circumstances, there are different options for you to consider at retirement. You will have the option to take a tax-free lump sum and may be able to use the balance to avail of:

1. A pension income for life (an Annuity).
2. An Approved Retirement Fund (ARF).

Most people will choose to take their tax-free retirement lump sum option of up to €200,000 from their pension fund (subject to Revenue rules) and then use the balance to meet their financial needs in retirement through one of three further retirement options:

1. Purchasing a pension income for life (also known as an Annuity);
2. Investing in an Approved Retirement Fund (ARF) or;
3. Cashing in the balance over €200,000 as taxable cash.

The retirement option that is right for you will depend on many factors, including:

1. The size of your retirement fund;
2. Annuity rates applicable come retirement;
3. The level of income you and your spouse/civil partner/dependants will need during your retirement years;
4. The number of other assets – apart from your retirement fund – that you have to fall back on;
5. Whether you wish to pass your retirement fund on to your dependents; and
6. Your current state of health.

Many people with pension funds of up to 500K will choose to cash it in altogether, as the tax payable between the first 200k and the balance of up to 500K is only 20%. Whereas the majority of people with pension funds in excess of 500K will opt to reinvest their pot in an ARF to allow their fund continue to grow with an income automatically payable.

The current low-interest-rate environment in Ireland makes the annuity option very unattractive.

For expert retirement advice coupled with best value retirement solutions arrange to speak with a One Quote retirement specialist today!

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