What happens to my Pension
if I die before I retire
askpaul explains what to your Pension if you die before you retire:
While discussing pensions, I thought it would be important to cover this topic off, as it is something that we get asked all the time. What happens to my retirement fund if I die before retirement age? It depends on what type of pension contract you are in. If you are in a personal pension or a PRSA, the whole fund goes tax-free to your estate. So, if you start planning your pension and paying into pension, say at 30 or at 50 years of age, you have €100,000 to €150,000 paid in, all that money goes tax-free to your estate if you die before you reach the retirement of that contract. That’s a really good benefit, and it’s really important that you understand that one.
If you are in an occupational pension scheme, that means if you’re in employment and your employer’s paying in and you’re paying in, you can only take out up to four times your income, tax-free from your pension on death before retirement age.
So, let’s run through a quick example of that. Let’s say you’re 55 years of age. You have €200,000 in an occupational pension scheme where you and your employer pay in and your salary is €40,000. In that instance, you can only take out €160,000 which passes to your spouse or your estate, tax-free.
The remaining €40,000 gets paid out as an annuity pension over time. It’ll be a small amount every year for your spouse. So again, I think that’s really, really important that you understand that they do pass on death, so it’s not a waste of money. It doesn’t go to the life assurance Christmas party when you die. So this is really important. And this is before you access your pension.
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