I am 60 years and am about to access my Personal Pension. What are my Retirement Options?

Accessing your Pension can be a confusing time. You want to make sure you maximise your tax-free lump sum entitlement and also ensure you have enough income for the rest of your life.

You will need to understand and give careful consideration to the following:

• How do you maximize your Tax Free Lump Sum entitlement?
• How much income you will get from your pension each week/month?
• How long will your pension income last?
• What happens to your pension if you die?
• What income tax will you pay on your pension income?

At this point, you may even have received communication from your pension provider requesting you to complete a form which asks you how much ‘Tax Free Cash’ you wish to receive and also asking you to choose between an’ Annuity’ or an ‘Approved Retirement Fund (ARF)’.

Terms such as ‘Tax Free Cash’, ‘Annuity’, ‘Approved Retirement Funds’ are issues we deal with every day, and we understand what these options really mean for you and your family.

What happens when you access your Personal Pension?

When you access a Personal Pension you will get:

• A Lump Sum of 25% of the value of the fund (up to €200K Tax Free)
• The balance of the Pension is taken in the form of an Annuity or Approved Retirement Fund also known as an ARF & AMRF

So, what is an Annuity?

An annuity is a financial product whereby after taking your tax-free lump sum from your pension fund you allow the insurance company / pension provider to retain ownership of your residual pension fund and in return they will give you a guaranteed income for the rest of your life. This is called an Annuity Income. Sometimes this annuity income will also allow a partial income payment for your spouse in the event of your subsequent death.

The obvious advantage here is the security of income but the disadvantage is that you will have to live a very long and healthy life before you eventually get back the value of your residual fund by way of income payments over your lifetime.

And what is an ARF / AMRF?

An ARF / AMRF is a investment fund operated by the insurance company / pension provider, but owned by you. The money is invested in the fund in much the same way as your original pension. There are some rules around income limits but in broad terms you are allowed to take income from it as you need it. In the event of you passing away any value left in the fund is paid to your estate.

For more information on accessing your pension, contact Joanne on 01 5267770 or email info@guardianwealth.ie