Do I have to ‘fully retire’ in order to access my Personal Pension?

I am a self employed sole trader, just turned 62. I have no wish to retire anytime soon but I would like to work less. I have a reasonable level of savings built up in my Personal Pension. Do I have to ‘fully retire’ in order to access my Personal Pension?

Congratulations on successfully running your business for the past 40 years. Like many self employed people you do not wish to retire completely, but would like to slowly reduce your working hours over the next few years. However, this reduced working time will also likely involve a reduction in income for you.

The good news is that because you are over 60 years of age, you are permitted to use your Personal Pension to supplement your reduced income from the business.

So, how do you access this Personal Pension?

You will be entitled to 25% (capped at €200,000) of the value of the Pension fund as a tax free lump sum. The balance of 75% is used to provide you and / or your spouse with an income in retirement, or in your case semi retirement. You have 2 basic options with this 75% of your Pension Fund:

Option 1 –Purchase an annuity. This is essentially a guaranteed annual or monthly payment for life from an insurance company. It is paid to you and stops when you pass away. In some cases a partial payment may be continue to be paid to your spouse. In most cases however you would have to live to over age 90 for the annuity option to make financial sense.

Option 2 –  Invest your funds in an ARF (Approved Retirement Fund) or AMRF (Approved Minimum Retirement Fund). If you opt for an ARF your money remains invested in an insurance company investment fund but also allows you, within certain Revenue limits, to dip in to your funds when and if you need them. You may for example decide that in certain years you need more income than in other years and this option allows you the flexibility to do this. The other big advantage is the ability to pass any unspent money in your ARF to your next of kin

Aside from the above, there are a number of other considerations involved with regards to the most appropriate and tax efficient way in which to access your pension. Remember you are not just making decisions with regards to your own standard of living in semi retirement but also need to consider the knock on effect these decisions might have on your spouse / partner, children or business in the future.

Call or email us today and we would be delighted to guide you through your options

 Michael Coburn BBS, QFA, FLIA, LCOI, RPA, SIA

Dublin: 01 5267770
Wexford: 053 9110380