Can a pension maturity date be pushed out?
Q: Liam, I set up a pension a number of years ago with Irish Life and the retirement age was set at 60. I’ll reach that age in November, but I’m not ready to do anything with this policy as I’m working and plan on continuing to work until I’m 65. The amount in this fund is about €25,000 and I don’t consider it my real pension as I have other funds in place. Do I have to take activate this policy when I’m 60?
A. You can extend the maturity date of your pension with Irish Life beyond the age of 60.
In fact, you can extend it beyond the age of 65 and not take benefits from it until you’re 75, if you wanted to. And if you don't need the money, I would suggest you leave it where it is, as it continues to grow tax free within the fund.
If you don't contact Irish Life, they’re likely to transfer your money into a cash fund, which is fine, but it will just sit there earning nothing. In fact, when you apply their annual management charge of 0.75% along with the return which is likely to be negative, you’ll end up losing money.
So, I would recommend you contact Irish Life and advise them you don’t plan on activating the fund when you’re 60. You’re not sure when you’re going to activate it but when you do, you’ll let them know. And rather than having your money transferred to a cash fund, tell them you’d like to continue invested in the same fund your currently in, that is assuming you’re happy with it and continues to match your risk profile. Or you want to transfer it into any of their other funds of which there is about 40 to choose from.
When you do activate this fund, I would suggest you take 25% of it tax free and the balance can be taken either as (a) a taxable lump sum assuming you have other pension funds which have a locked minimum amount of €63,500 or you have an annual income > €12,700 per year or (b) it’s transferred to an Approved Retirement Fund. Depending on the amounts, I would probably take a taxable lump sum rather than receive a small amount from it every year, especially if doesn't form a major part of your income in retirement.