Question

I have read with interest how the government are "raiding" the national pension reserve in order to raise finance. I contributed heavily into my pension in recent years. Are there any circumstances in which I can do the same i.e. access my pension fund early?

Answer

Revenue rules dictate that you cannot dip into your pension fund except in very limited circumstances. With most pension plans you can take your pension benefits early if you become seriously ill and have to give up work as a result. Otherwise, the earliest you can take your pension benefits is largely dependent on the type of plan you have.

If you are self employed and you have paid into a personal pension plan or a PRSA the earliest you can take your pension benefits is at aged 60. You do not necessarily need to have retired and you can continue to work if you so wish.

If you are an employee and a member of your Employers pension scheme or you have made AVC's you usually have to wait until you are aged 60 or in some cases 65. However some plans do allow for early retirement from aged 50 provided you have left service and you have your employers consent.

For company directors holding more than 5% of the voting shares in the company the normal retirement age is from 60 onwards. However you can access your benefits from aged 50 in limited circumstances. To qualify you will have to resign as a director of the company and give up your shareholding in it.

Regardless of the type of pension you have, you will on retirement be entitled to a certain proportion of the fund tax free. As a general rule you will receive a tax free lump sum which is based either on your years service with a maximum payout of 1.5 times final salary, or 25% of the fund value. Your choices with regard to the remainder of the fund are subject to your individual circumstances and the type of pension plan you have.

Where an employer's pension scheme is wound up or where the member leaving has less than two years pensionable service personal contributions can be refunded. As such the scope for refunding contributions is very limited and this option is not available at all to proprietary directors i.e. directors holding more than 20% of the voting rights of the company.

So, unless you have reached retirement age as per the rules above, it is highly unlikely that you will be able to access your fund.

In the event that you are in a position to access your fund you need to be acutely aware of your fund value before making any commitment. Historically pension funds were largely invested in equities and we are all aware that shares have declined sharply in the last 18 months. Now may not be a good time to "cash in" your pension fund.

Taking your retirement benefits is a complex area and Revenue rules are quite stringent. You should speak to your financial advisor or accountant for more information before making any decision.

For further information on any of the above contact:
CML Financial, Independent Financial Advisors, The Business Centre, Lisfannon, Buncrana, Co. Donegal, T: +353 (0)74 9364255 F: +353 (0)74 9361955
CML Financial Limited t/a CML Financial is regulated by the Financial Regulator

Joanne Enright MSc QFA MSI
Email: joanne@cmlfinancial.ie