Pensions

Pensions

A range of options when you retire

Personal Pension

Personal pension plans are available if you are:

  • self-employed
  • a sole trader
  • partners in a legal partnership
  • working for a company that does not have a pension scheme

A range of options

If you have a personal pension plan, you can take your retirement benefits at any age between 60 and 75. You do not actually have to retire and stop working. As soon as you reach 60, you can take your benefits and continue working.

There are some circumstances when you can take your benefits before age 60. You may take your benefits if:

  • you are seriously ill and due to your ill health you have to permanently give up work
  • you work in specific occupations where it is normal to retire before 60 (for example, professional sportspeople, air pilots and fishermen).

Options at Retirement

At retirement you have the option of taking a tax-free lump sum. Most people take the maximum amount allowed under this option. If you have a personal pension plan, you can take a tax-free lump sum of up to 25% of your fund and use it for something you've always wanted or you can reinvest your lump sum to provide you with further income throughout your retirement.

Warning: The value of your investment may go down as well as up.

Warning: This product may be affected by changes in currency exchange rates.

Company Pension

In many companies employees will join the company pension scheme. With company pensions the employer make some or all of the contributions to your pension. Sometimes you will make contributions. These are called 'ordinary' contributions.

All company pension plans are set up under trust with trustees appointed to make sure that the pension is run for the benefit of it's members. This means that all decisions about the pension must be approved by the trustees.

There are two types of company pension plans:

  • Defined contributions schemes?with this type of pension all contributions received from employers and employees are invested in an investment fund. The amount of pension benefits you can get when you retire will depend on the size of this fund and the cost of the pension benefits at the same time you retire.
  • Defined benefit schemes?with this type of pension, the trustees guarantee to pay you a guaranteed level of benefits no matter how the fund has performed or the cost of providing benefits when you retire.

The trustees (or your employer) would have set your retirement date between age 60 and 70. You may be able to take early retirement from age 50 if the trustees of you pension scheme and your employer agree. If you own or control 20% or more of the shares in the company, you will also have to sell your shares. You may also be able to retire if you are seriously ill and due to your ill health you have to permanently give up work.

Options at retirement

The options you have at retirement for your pension fund from a company pension will depend on whether or not you control more than 5% of the voting rights in the company.

The tax-free lump sum available under a company pension plan will depend on your circumstances and how long you have been working for the company. The trustees of your company pension scheme will tell you the maximum tax-free cash you can take based on your salary and service. After you have taken your tax-free cash, you must use the rest of your fund to buy an annuity.

Warning: The value of your investment may go down as well as up.

Warning: This product may be affected by changes in currency exchange rates.

Additional Voluntary Contributions (AVCs)

If you are in a company pension, you can pay contributions on top of the 'ordinary' contributions you must pay. You can use the fund from this type of plan to add to your main company pension benefits. Yours contributions are called additional voluntary contributions (AVCs) and you can pay them directly into your main scheme (subject to scheme rules), into a separate AVC plan, or in to your PRSA.

As your company pension plan and AVC are linked, the retirement age for both will be the same. You must take your benefits from your AVC at the same time as you take your benefits from your company pension.

You may have paid AVCs into your main scheme or into a separate AVC plan or into your PRSA. The AVC fund will help to make up the shortfall between the maximum benefits you are allowed under your main scheme and what your main scheme actually provides.

Tax-free lump sum

The amount you can take as a tax-free lump sum under your AVC will depend on the rules of your company pension plan. This will depend on your circumstances and how long you have been working for the company. The trustees of your company pension scheme will tell you the maximum tax-free cash you can take based on your salary and service.

Options for Directors

If you are a director (controlling more than 5% of the voting rights) and you decide to take 25% of your retirement fund as a tax-free lump sum, you can also take 25% of the fund build up by your AVCs as a tax-free lump sum.

Using the rest of the AVC fund

All employees and directors, whatever voting rights they have, have the same options when using the rest of their AVC fund. Depending on whether you contributed your AVCs to your main scheme, or to a separate AVC, or a PRSA.

Warning: The value of your investment may go down as well as up.

Warning: This product may be affected by changes in currency exchange rates.

Personal Retirement Saving Accounts (PRSAs)

PRSAs are pension plans that you take with you as you move from one job to another. They are available if you are:

  • self-employed
  • a sole trader
  • partners in a legal partnership
  • working for a company that does not have a pension scheme
  • not currently working

If you are an employee and a member of a company pension scheme, you can also make additional voluntary contributions in to your PRSA.

Taking your retirement benefits

You can take your retirement benefits at any age between 60 and 75. You do not actually have to retire and stop working. As soon as you reach 60, you can take your benefits and continue working. There are some circumstances when you can take your benefits before age 60. You may take your benefits if:

  • you are seriously ill and due to your ill health you have to permanently give up work
  • you work in specific occupations where it is normal to retire before 60 (for example, professional sportspeople, air pilots and fishermen).
  • you are working as an employee. You can take your benefits from the age of 50 if you stop working for that company. This option does not apply if you are self-employed, a sole trader or partners in a legal partnership.

Taking a tax-free lump sum

At retirement you have the option of taking a tax-free lump sum. If you have a personal pension plan, you can take a tax-free lump sum of up to 25% of your fund and use it for something you've always wanted or you can reinvest your lump sum to provide you with further income throughout your retirement.

Warning: The value of your investment may go down as well as up.

Warning: This product may be affected by changes in currency exchange rates.

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