Saturday 16 December 2017

Know your options when wishing to access your personal pension early

Q . I am a self employed sole trader, just turned 62. Whilst I have no wish to retire anytime soon I would like to work fewer hours. Being self employed for over 40 years, 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? A . Congratulations on successfully running your business for the past 40 years. Like many self employed people you do not wish to retire completely but instead would like to slowly reduce your working hours over the next few years. However, this reduced working time will may also involve a reduction in income for you.

The good news is that as you are more than 60 years of age, you are permitted to use your Personal Pension to supplement your income. So, how do you access this Personal Pension? With personal pensions 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 can opt to use your remaining 75% pension value to purchase an annuity – essentially a guaranteed payment for life which will pay you or your spouse an income for life.

Alternatively, you may opt to place your funds in an ARF (Approved Retirement Fund) or AMRF (Approved Minimum Retirement Fund). Essentially this type of arrangement 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 may allow you the flexibility to do this.

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.

Whilst the above information is a simplification of the options available to you, the essential point is that you can access your Personal Pension from age 60. This will allow you to use the Pension to supplement your reduced income from the business over the coming years. Jim Doyle ACMA QFA is a partner in RDA Accountants offering full accountancy, business advisory, tax advisory and financial services. RDA Accountants | 5 Upper George Street, Wexford | Louisville House, Waterford Road, Kilkenny | 053 91 70507 | RDA Wealth Ltd trading as RDA Accountants is regulated by the Central Bank of Ireland

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