Now that you are at retirement you have an important financial decision to make regarding your pension fund and how it could be best used to meet you and your family’s needs in the future.
Two of the most important factors you should consider are the way in which you wish to use your pension fund to provide an income in retirement and whether you wish to pass the balance of your fund to your dependants after your death.
What you can do with the proceeds of your pension plan depends on which employment category you fall into and the type of pension plans you currently hold. Depending on your circumstances there are different options for you to consider at retirement. You have the option to take a tax-free lump sum and may be able to use the balance to avail of:
- A pension income for life (an Annuity)
- An Approved Retirement Fund (ARF)
- A taxable lump sum
Most people will choose to take the very attractive tax-free retirement lump sum option of up to €200,000 from their pension fund (subject to Revenue rules) and then use the balance to meet their financial needs in retirement through one of three further retirement options:
- Purchasing a pension income for life (also known as an Annuity),
- Investing in an Approved Retirement Fund (ARF) or,
- Taking a taxable lump sum,
The retirement option that is right for you will depend on many factors, including:
- The size of your retirement fund;
- The level of income you and your spouse/civil partner/dependants will need during your retirement years;
- The amount of other assets – apart from your retirement fund – that you have to fall back on;
- Whether investment growth or security is more important to you during your retirement years;
- Whether you wish to pass your retirement fund on to your dependants; and
- Your current state of health.