If you are thinking of accessing a defined benefit or DB pension early then this article gives a quick breakdown of the things you should know. For more in-depth information please see Accessing DB Pension Early
You can access a defined benefit pension early in Ireland from 50 once you no longer work for the employer you grew the pension with. There are however several important considerations you should take into account as you have a particularly valuable pension plan.
Defined Benefit Pension
A Defined Benefit pension plan is a pension that provides you with a specified income in retirement. These pensions used to be common in Ireland but once it became clear that these pensions could potentially cost employers a lot more than intended many employers stopped offering them.
Why are Defined Benefit Pensions so valuable?
The majority of pensions nowadays in Ireland are defined contribution schemes. In a defined contribution scheme, your employer and in some cases, you make payments into your pension. Your pension is then invested. The value of your pension can go up as well as down so the amount you receive at retirement depends on the performance of your pension investments.
A Defined Benefit pension is different. Your employer promises that you will receive X amount in retirement. The amount you receive is not tied to investment performance. This places the risk on the employer to grow the fund to meet the commitments they have made to you.
Should I Cash in my Defined Benefit Pension?
Cashing in a defined benefit pension should be avoided where possible. This is not always possible so in cases where access is required a financial advisor will be able to help. Your financial advisor will be able to explain the implications in addition to extracting the most value possible for you. They can highlight common pitfalls ensuring you make the most financially advantageous decision for you.
How to Access DB Pension Early?
To access your DB pension, you will need to speak to a financial advisor who has experience in this field. Not all financial advisors will provide this service. First, your advisor will review your pension in full and compile a list of available options along with their recommendations based on your particular situation.
You can then consider the options offered to see if any of them are suitable. If you choose to proceed with access, you will normally be offered 25% of the fund tax-free. The remainder can be taken as a taxable lump sum or you can reinvest it to take at a later date.
The best option for someone else may not be the best option for your particular situation. If you are considering access the wise thing to do is to get all the facts from an experienced financial advisor. You can then make an informed decision regarding early access. If you would like to find out more seeAccessing DB Pension Early
