Elder Intro Lifestage Considerations 05 Savings Investment Pensions

Another consideration for moving towards retirement is obviously the whole issue of savings, investments, and pensions. If you take those in reverse sequence, you will possibly be looking to transition from earned income to some sort of pension.

If you are eligible for a state pension and you have sufficient PRSI contributions, you may be claiming a State Contributory pension, which is not means tested.

If you are eligible for a state pension but don't have sufficient pre- or post-PRSI contributions, then you will likely qualify for a means-tested state non-contributory pension in Ireland. The amounts that are paid on each of these pensions are quite similar; however the difference comes if there are additional incomes coming into the household, which then get factored into a means test.

It is possible that you may have a state pension in your own name or you may be counted as a qualified adult on another adult in the household's (typically a spouse's) state pension. This means as a qualified adult you won't be receiving the money directly into your hands and the income to the household is dependent on the main account that that is associated with.

Typically people will be combining a number of different pensions. People nowadays will be combining a number of different pensions so there may be workplace pensions from one or more employments. These possibly could be claimed at different times. Possibly they don't have to be vested at the same time or at a particular retirement age. State pension age in Ireland is age 66 at the moment. This creates very good service and can greatly help with the challenge of shifting between two forms of income.

Alternatively you may continue to invest if you have a pension which is investment-based, such as a workplace pension, and it is a defined contribution pension. In other words you were restricted in what you're good for and it allows for potentially limited growth or loss. It is possible to convert these at a time of your choosing so there may be an advantage to leaving a pension invested before converting it.

At the time of converting you are likely to be choosing either an annuity, which is a guaranteed income for life, or possibly you will transfer into an approved retirement fund or ARF, which has the concept of continued investment. With an approved retirement fund there are mandatory withdrawal years which kick in at age 61 and beyond. It broadly speaking works on an assumption that you'd withdraw 4% per year and that you would be taxed on this. You will find a reduction in PRSI at this point in life; however you are still eligible for income tax. There have been cases in previous years where people didn't pay income tax at source and found that they faced a larger bill later on.

You may continue with savings. The trick with this, as always, is to watch your interest rate and you may have other investments which continue. They could be in the form of property or in the English form of stocks and shares and these may potentially be continued at this stage in life. The biggest consideration for you is being aware of what tax will be payable as and when you encash these different schemes and indeed whether you'll be forced to encash certain schemes at certain ages. 

Another factor in this stage of life is marital status. Here you're looking at aspects like inheritance. Your marital status, if you are unmarried, may affect the rights of the second adult in your household (assuming it is only two) to obtain an element of your estate. It is important to check this small print here and actually work out in detail what each of you may be entitled to if something happens to the other person. Another case which comes up