Pension Lump Sum at 50

Pension Lump Sum at 50

For many people, accessing their pension lump sum at 50 is a convenient way to obtain some tax-free cash.

 

 

This article is for those interested in learning more about accessing a tax-free lump sum from their pension at 50 while continuing to work.

 

 

If this applies to you, this article will provide the necessary information and explain how you can prepare your options for free.

 

 

If you wish to access your entire pension at 50, visit Cashing in Pension Fund Early for more useful information. 

At A Glance

What is a Pension Lump Sum at 50

Each person is entitled to take a 25% tax-free lump sum from their pension pot when they retire. Although in some cases you may be able to access more that 25%.
 

Taking your pension lump sum at 50 allows you to access this tax-free amount before retirement.

 

 

However, if you take your tax-free lump sum early, you cannot do so again when you officially retire.

 

 

If you have multiple pensions, you can take the tax-free lump sum from one pension now and save the lump sum from another pension to take when you retire.

 

 

You can take a tax-free lump sum from each of your pensions, up to a lifetime limit of €200,000 from all your pensions combined.

 

Can I Take A Pension Lump Sum at 50

Image shows a piece of white A$ paper with the words "Do you know about tax free lump sum?" Answer Yes is circled below.

Yes, in many cases, you can take a tax-free lump sum from your pension once you turn 50.

 

 

Your ability to take a tax-free lump sum  will depend on the type of pension you have.

 

Employer Pension Schemes

If you have an employer’s pension scheme or a Personal Retirement Bond (PRB), you must meet the following criteria to access a pension lump sum at 50.

 

Employer Pension Scheme Requirements

If you meet these conditions, proceed to the section How to Get My Pension Lump Sum at 50.

Private Pension Schemes

Access to a private pension is typically restricted until age 60. However, in some cases, you may be able to access your tax-free lump sum earlier. 

 

To access a private pension from age 50, you must meet the following conditions:

Private Pension Scheme Requirements

For more detailed information on accessing some or all of your private pension early see Accessing Private Pension Early.

How Can I Take A Pension Tax-Free Lump Sum

Image shows a glass jar with the word pension on its side with coins in and beside the jar.

Normally the retirement age of  pension schemes in Ireland start from 60+. 

 

Your retirement benefits are locked until you reach this retirement age set in your scheme rules.

 

However with the help of a financial advisor you can transfer your pension from your current scheme into a personal retirement bond (PRB).

 

Once the transfer is complete the old scheme rules no longer apply and the retirement age of your pension scheme is reduced to 50.

 

This enables you to access your tax free lump sum from your pension once the transfer is complete. 

Do I Need To Use A Financial Advisor to Access Pension Lump Sum?

There are some important factors to consider when deciding whether or not using a financial advisor to access your pension lump sum from 50 will be worthwhile for you. 

Accessing Entire Pension

If you want to take your entire pension now and your provider can transfer it into a PRB, it makes sense to access your pension directly through them.

 

Why? If you are accessing your full pension, you won’t have any remaining funds to invest, so using an independent financial advisor offers little benefit.

 

However, not all pension providers offer PRBs to their clients. If your provider cannot transfer your fund into a PRB, you will need a financial advisor to assist with the process.

 

There will usually be a charge for using a financial advisor if you are accessing the full pension (not reinvesting).

 

Therefore, it is important to check with your pension provider first to see if they offer this service to avoid unnecessary fees.

Accessing Lump Sum Only

If you plan to access only your tax-free lump sum, you will need reinvestment advice to optimise the performance of the funds remaining in your pension.
 

The remaining funds cannot stay in your old pension scheme. To access your lump sum, you must retire the full fund from your old pension scheme. You then take your tax free lump sum and reinvest the remaining funds for future withdrawal.

 

If you access your pension directly through your provider, they will recommend how to reinvest the remaining funds. However, they are only obliged to offer products from their own list.

 

Even if a competitor offers a fund with the same risk rating which has historically provided higher returns with lower charges, your provider does not have to disclose this to you.

 

Not searching the entire market for reinvestment options can be a costly mistake. You could end up with higher charges and lower returns which would result in a significantly lower fund for you to take at retirement. 

 

An independent financial advisor on the other hand, regulated by the Central Bank of Ireland, is obligated to conduct a thorough market analysis and offer you the most suitable investment option for you.

 

Would you like investment options from just your provider, or would you prefer options from various providers such as Aviva, Zurich, Irish Life, Royal London, etc.?

 

Another benefit to working with an independent advisor i that their service is typically free if you are making an investment.

 

Yes, we did say free, and the benefit to using their services is easy to see.

Why is the advice free?

When you make an investment, the financial advisor receives a commission from the pension provider, which covers the advisor’s fee.

 

Pension providers pay all advisors a commission as a cost of acquiring new clients.

 

Consider it this way: if a provider wants to attract new clients directly, they invest in advertising.

 

 

If they want to gain clients through independent brokers, they pay a commission. Either way, there is a cost to acquiring new clients for providers.

 

 

This setup allows you to receive free financial advice, free PRB setup, free processing of your pension lump sum and free investment advice, all paid for by your new pension provider.

 

You’d be silly not to take advantage of this free expert advice.

 

Besides if your advisor comes back and recommends reinvestment with your current provider (if they are the most suitable) you can then proceed directly knowing your reinvestment option is the best on the market. Its a win for you either way. 

 

How Can I Get My Pension Lump Sum Options For Free?

If you want to learn more about taking a pension lump sum from age 50, a free early pension access review can help.

 

During your review, your financial advisor will first confirm whether you are eligible to take a pension lump sum from 50.

 

If you are eligible, they will explain the process and provide you with a list of reinvestment options.

 

Take your time to review the options your advisor provides and determine if any are suitable for you.

 

The review is free and without obligation, so you can take your time to ensure the decision is right for you.

 

If you decide not to proceed or change your mind, you can close your free review at any time.

 

For more information about a free, no-obligation review, see “How a Free No-Obligation Early Pension Access Review Works.”