Cashing in Pension at 50 Ireland – How much can you take?

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Considering Cashing in your pension at 50 Ireland? If so, this article will explain how much you can take from your pension and how you will be taxed. If you would like to check if you are eligible to cash in your pension early you can do so using our early pension access checker. SeeCashing in Pension at 50 Ireland

Pension Lump Sum at 50

When you access any pension, you are entitled to take a tax-free lump sum. Normally you will receive 25% of your fund tax free. In some cases where you have worked with your employer for a significant period of time you may be entitled to receive a higher tax-free amount.

This calculation is known as a salary and service calculation and will be run by your financial advisor to see if you are eligible to take a higher amount from your pension tax free.

How much tax will I pay on Early Pension Withdrawal Ireland?

First, it is important to note that you can take your tax-free pension lump sum normally 25% without creating a tax bill. You only create a tax liability when you access an amount over your tax-free lump sum.

For example, if you take your tax-free lump sum and decide to take an additional €10,000 from your fund then you will pay tax on this €10,000 as if it were an income.

So, if you are on the higher tax rate you will pay 40% income tax or if you are on the standard rate you will pay 20% in tax up to the cut off point.

Essentially the easiest way to explain it is to imagine the €10,000 is coming directly from your employer and not your pension. You will be taxed the same way you are taxed when receiving your wages.

How do I receive the money when cashing in my pension at 50 Ireland?

When accessing your pension early, your funds are sent directly by your pension provider to your bank account. They are not received or held by your advisor at any stage during the process.

If you access your tax-free lump sum only, you will normally receive one payment directly from your pension provider for this amount. If you opt to take an amount over your tax-free lump sum you will normally receive two payments.

The first will be your tax-free lump sum. The second payment will be the additional amount requested less any tax due to Revenue. Similar to your employer, your pension provider will pay the appropriate figure to Revenue on your behalf first and then transfer the remaining fund to your account.

If you want to receive a specific amount then it is wise to discuss this with your financial advisor. They can help estimate your tax liability ensuring you withdraw the correct amount required to provide you with the amount you need after you have paid tax.

Can I cash in all my pension at 50?

Yes, technically you can cash in all your pension. However, after you take your tax-free lump sum any remaining funds you take will be taxed. If you are on the higher tax rate this will result in a significant tax bill. In some instances, this may be acceptable to you for instance where you have another pension or if the pension you want to access is quite small. If you are experiencing financial difficulty and feel early pension access could help, you should speak with you advisor to see if there are any other options open to you which may be more helpful. See Cashing in Pension at 50 Ireland for more information. You can also request a free early pension access review.

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