Managing A Pension

Its important to take care of your pension and what you need to do depends on its stage of development:

Starting out

Work out what kind of income you want when you retire, over and above the State pension. Then consider if you need to provide for other dependents. Allow for any other assets that you may have, that you can use in retirement such as investment property, savings and investments. Although you may think that in retirement some costs will reduce, be aware that other costs may increase, for example, medical and health care costs, etc.

Early – mid career

Keep up to date on what your expected pension benefits will be. Ask for valuations. If you have a defined contribution plan or personal pension plan, you get a statement once a year. Members of defined benefit plans can get a similar statement from the trustees of their fund. If you have a PRSA, you should get an annual statement of reasonable projection and a six-month report on the performance of your fund.

Review your pension fund regularly and increase your contributions if you need to and if you can afford it. Ask about making additional voluntary contributions (AVCs).

Check www.revenue.ie for up-to-date information on tax relief on pension contributions.

Check if you are eligible to join your employer pension plan and whether the scheme is defined benefit or defined contribution. If there is no employer pension plan in place, your employer has to make a standard PRSA available to you.

Find out what fees and charges will apply to your fund both initially and yearly and if your contributions will increase each year in line with inflation.

Ask how flexible your plan is and if you can stop paying contributions for a time, increase or reduce your contributions.

Find out what the estimated future value of your pension is (if your plan is defined contribution), assuming a set rate of fund growth each year.

See if there are any death-in-service or disability benefits for you, if this is important for you. And you may want to consider additional measures if you need to provide a pension for your dependants after you die.

8 -10 years before retirement

If you have a personal pension, as you approach eight to 10 years to go to retirement, your funds should start to be moved to what are seen as less risky investments and you should check that this happens.

Pre-retirement

Research your benefit options so that when you reach retirement you are prepared to make the right choice for you. Talk to the HR or pensions department at work, your pension provider or seek advice from a financial advisor before you make any decisions.

Retirement

For employer pension plans You can take part as a tax-free lump sum (up to certain limits). You may be able to use the remainder to:

• take a pension for retirement (on which you have to pay income tax).

• transfer it to an approved retirement fund (ARF) or an approved minimum retirement fund (AMRF);

For employer AVCs (if you use to boost your pension). You can take part or all as a tax-free lump sum (up to certain limits). You can use the remainder to:

• increase your basic pension;

• transfer it to an ARF or to an AMRF

For personal pension plans and PRSAs, you can take 25% of your retirement fund as a tax-free lump sum (up to certain limits). With the remainder of the fund you can buy:

• an annuity;

• an AMRF;

Or if you already have a certain amount of yearly pension from another source you can:

• invest in an ARF;

• take as cash – taxed as income.

Post retirement

Remember that your pension payments are taxable as income. If you have received a tax-free lump sum that you want to save or invest, consider contacting a financial advisor.