Tuesday 23 January 2018

Your Questions: How quickly will my wife be able to access the money in my pension should I pass away?

The amount of money in a pension fund that a pension fund provider allows to be accessed without probate varies considerably from company to company (Stock picture)
The amount of money in a pension fund that a pension fund provider allows to be accessed without probate varies considerably from company to company (Stock picture)

I am approaching retirement and want to make sure that my loved ones are provided for when I pass away. One thing I'm worried about is how quickly my wife - who has no private pension of her own - will be able to access my pension should I pass away before her.

I have built up a very good private pension - but have heard that it could take months, perhaps a year, for my wife to be able to access my pension after I pass away. Is this correct - and if so, is there anything I could do now to ensure my wife can access my pension immediately?

David, Naas, Co Kildare

Your question raises a very important issue. Do you have your will written and is your wife named as the beneficiary? We strongly recommend that you have a will in place as the absence of one will cause unnecessary delays in settling your affairs.

Working on the basis that you do have a will, then processing a death claim from a pension plan should not take too long - once all of the paperwork is in order.

However, if you pre-decease your wife before drawing down you pension, your pension fund will become part of your estate and may be subject to probate. Should your pension fund become subject to probate, it could be several months before your wife can access the money in your pension fund as she will need to wait until the probate goes through.

Depending on the pension provider, your wife may be able to access up to €150,000 in the pension fund - without having to wait for the probate to go through. The amount of money in a pension fund that a pension fund provider allows to be accessed without probate varies considerably from company to company. Some pension providers are unwilling to release any money before the probate goes through, most are willing to release between €25,000 and €60,000, and one company is willing to release up to €150,000, according to research recently conducted by ourselves.

For the purpose of clarity, it would be a good idea for you to ask you pension provider exactly how much of your pension fund it would release to your wife before probate goes through (should you pre-decease her).

It is also important that you carefully plan what you do with your pension fund on retirement. When you retire, you will have the option of taking 25pc of your pension fund tax-free (within Revenue Commissioner guidelines). These funds (in full or in part) will more than likely be further invested and we would strongly recommend doing this on a joint life basis so that your wife can have immediate access to the funds if required. You should also consider investing the remaining 75pc of your pension fund in an Approved Retirement Fund (ARF) rather than an annuity. One of the main differences between an ARF and an annuity is that with an ARF, you own your retirement fund. This means that when you die, you can leave any remaining funds in your ARF to your wife or other beneficiaries.

People often worry that if they died soon after buying an annuity, there may be no further pension payments made.

Should you opt for the annuity route, however, buy a guaranteed annuity rather than an annuity without a guarantee. With a guaranteed annuity, your pension will continue to be paid to your estate for a certain amount of time - even if you die shortly after buying your annuity.

Finally, as your pension fund is written on single life basis, it is important that your bank accounts are in joint names with your wife - as this will allow her access to funds if and when required.

I worked in Britain for about 20 years and paid into a pension over there at the time. I moved back to Ireland about 10 years ago but left the British pension where it is. I am worried about the impact which Brexit could have on the value of my British pension - particularly given how weak sterling has become. Is now a good time to transfer the benefits built up in that pension back to Ireland - and if so, how would I go about doing so? Also, how else might I safeguard this British pension from any knocks it could take on the back of Brexit?

Sean, Tralee, Co Kerry

Brexit has left many Irish citizens with deferred British pension entitlements in a state of uncertainty as they consider the possible future implications of retaining their funds outside the European Union. As you left Britain over six years ago, you can transfer the funds to a buy-out-bond here in Ireland but you are relying on the British pension provider to fully cooperate with the transfer.

There are a number of product providers in Ireland which allow you to transfer the funds to Ireland and keep the funds in sterling. This is of particular interest at this time, given the weakness of sterling at the moment. Under this scenario, you can continue to invest in sterling assets and make the move back to the euro when nearing retirement or when the rate improves.

In terms of safeguarding against Brexit, that is not easy to answer as we don't know how Brexit will affect funds. It could be argued, for example, that it helps some Irish commercial property funds as British offices move their bases to Ireland. Obviously, in terms of equities, you have seen recent drops in the share prices of British banks. There are structured products available in Ireland which might offer soft protection against Brexit. If you leave your funds in Britain, then perhaps there are funds there that could also offer a safeguard.

As this is a very complex area, it is imperative that you seek independent financial advice before making any decisions on either transferring funds or on your best investment options.

The retirement age in my workplace is 65 and as I am 64, I will be retiring within the year. I will get a very small pension through work - which won't be enough to get by on. The State pension doesn't kick in until I'm 66, so I am worried about how I will get by financially in my 65th year. Will I be able to get the dole - even though I won't be "actively" looking for work. And is there any other way I could boost my income in my 65th year?

Geraldine, Dundrum, Dublin 16

Your question raises an important dilemma which affects everyone in the workplace as the State pension age will be increased further over the years. Currently, the State pension is paid from the age of 66. From January 1, 2021, it will be paid from the age of 67 and from January 2028, it will be paid from the age of 68.

However, in most occupational pension schemes, the normal retirement age is still 65. Some employers have and are allowing people to work on after the normal retirement age which is something to consider.

To boost your pension funds, it is important that you maximise your Additional Voluntary Contributions (AVCs - pension top-up arrangement) as the transitional State pension (which was paid to those between the ages of 65 and 66) has been abolished from January 1, 2014.

Having reached 65, in your wait to reach age 66, you may qualify for the Job Seekers Allowance - though there is no guarantee that you will get it.

Email your questions to lmcbride@independent.ie or write to 'Your Questions, The Sunday Independent Business Section, 27-32 Talbot Street, Dublin 1'.

While we will endeavour to place your questions with the most appropriate expert to answer your query, this column is a reader service and is not intended to replace professional advice.

Sunday Indo Business

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