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Options at retirement: Retained Benefits

Claiming benefits from previous employments


People retiring today will typically have had multiple employments over their working life. This can mean having accumulated several different sets of pension benefits. These may differ in nature such as when benefits may be drawn, flexibility in the scheme structure or the nature of the payment. For those who have been self employed, ran their own business, made Additional Voluntary Contributions (AVC’s for short) to their pension over their working life, the situation can become even more complex. Understanding your options and how best to maximise the value of your benefits both now and in the future should come increasingly into focus at the point of retirement.


Options at retirement 

From a pension perspective retirement is a technical event and need not necessarily coincide with your retirement from employment. This can be particularly true when considering benefits from previous employments which may have different rules. For example your current employment may provide for retirement at age 66 whereas benefits retained from a previous employment may consider retirement at 65. 


The choices you make at this time will have a bearing on your future financial well being. At retirement you need to consider whether you should you retire all benefits simultaneously or may it be beneficial to retain previous benefits separately and perhaps unretired for the time being. You will have the opportunity to take a portion of your accumulated benefits as tax free cash. This will generally be up to 25% of your scheme value but could be as high as the full scheme value. 


Key choices will relate to:

  • Income in retirement

  • Timing of retirement

  • Amount of cash free cash to take

  • Managing drawdown

  • Setting an appropriate investment strategy

  • Your future plans

  • Your health

  • Inheritance and family considerations 


Key considerations

  • Understanding the nature and value of accumulated benefits from your existing, as well as previous, employments

  • Your employment status, likely future earned income and income derived from other sources 

  • Your post retirement plans

  • The value of accumulated pre-retirement benefits 

  • Developing appropriate investment strategy considering post retirement income and managing technical pension rules such as imputed distribution which requires you to draw between 0% and 6% from your retired pension scheme on an annual basis.

  • Maximising tax free cash

  • Your broader savings and investments

  • Your broader circumstances such as age, health, family, household expenditure, outstanding debts and future plans


Forms of benefit

Leaving aside benefits from your current employment (for more information click here) and previous benefits that were transferred to your current employers scheme when you took up your most recent role, benefits from previous employments will be held in the following forms:


  • Paid up benefit with previous Defined Contribution (DC) occupational pension scheme 

  • Paid up benefit with previous Defined Benefit (DB) occupational pension scheme 

  • Buy out Bond

  • PRSA

  • Personal Pension


Each of the above may come in various forms or under particular provider branding.


Retiring your pension

Retirement is not something that will happen automatically, you will need to take action to trigger retirement though you will generally receive information from your provider so long as they hold up to date contact information for you. This will give you options however it will not more broadly consider your personal situation which is critical in making relevant and appropriate choices. 


Typically you can retire your pension between age 55 and 70 however, this can in some circumstances be stretched at to age 75 or as early as age 50 with certain restrictions applying. 


When it comes to pensions from previous employments it is worth considering whether it is best to retire these concurrently with the pension from your current employment or if there may be benefits in keeping them separate and perhaps unretired.


Finally you should consider that there can be negative circumstances should your retirement not be administered in accordance with pension rules in particular if the value of the scheme exceeds the Standard Fund Threshold or if you do not draw benefits from an occupational scheme before age 70. 


Taking advice

Retiring pension benefits can be complex and each individuals circumstances differer. Taking advice can help you fully understand your options and facilitate you in optimising the value of your pension benefits.

Take advice...

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