Question: I started a pension when I got my first job 30 years ago. I have not thought much about it over the years but my youngest son, who is now in his Leaving Cert year, wants to go to university in the US next year. It is going to be pricey and I really want to be able to send him. Can I cash my pension in now before I retire?
A: Withdrawing a pension early is generally not advised, according to the chief executive of the Irish Association of Pension Funds, Jerry Moriarty. He says pensions are a very tax-efficient financial tool that are there to provide for the pension holder's retirement. The downside to cashing in early is not only that you could be leaving yourself financially exposed in retirement, but you will lose some of the tax efficiency of a pension.
Because you get tax relief on the money you pay into your pension, there are lots of rules on how and when you can take it out, Mr Moriarty says.
Technically, however, if you do decide that this is what you want to do, you may well have options to access this cash. If you are over 50 and you don't work in the company in which you started the pension, then you can access it.
You will be able to take some of the amount in the pension as a tax-free lump sum, but will have to pay tax on the remainder or take it as income. You should get independent financial advice.
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