What is the Normal Retirement Age?
Normal retirement age is the age at which you can take your pension benefits from your employer pension scheme. There is a mandatory retirement age of 70 in the public sector, but this is not the case in the private sector.
The normal retirement age in the public sector is usually between the ages of 60 and 75, with the majority of contracts setting this at 65 (as this is when the old age pension becomes payable for most). However, changes in legislation in recent years mean that an individual may not receive the state pension until age 68 depending on the year they were born.
When can I access my pension?
One can only retire and access pension earlier than 60 on the grounds of ill health, or can opt to take early retirement from age 50 with the consent of their employer. There are however a small number of professions where the Revenue permit retirement prior to 60 such as sportspeople for example.
Can my employer force me to retire?
This issue is very topical as recently there have been legal cases brought against employers for forcing employees to retire at a certain age.
There have been two high profile cases which have been reported of late, one concerning a former RTE producer and the other concerning a Longford Local Authority employee. It was ruled that in both cases that it was deemed discriminatory to expect them to retire at the age of 65.
Mandatory retirement age may not be seen as discriminatory as we all age, but generally an employer must be able to demonstrate that they have taken an objectively justifiable view when enforcing a mandatory retirement. In essence, your employer should be able to provide you with reasonable and legitimate reasons for terminating your employment at 65. It should also be noted, however, that an individual with a contracted retirement age cannot claim unfair dismissal.
Two Bills were presented to the Dáil in December 2016 calling for the abolition of mandatory retirement age, but nothing has been passed into legislation as of yet.
What happens when I reach my Normal Retirement Age?
There is much confusion over when an employee must retire, and many employees are being told that if they are a member of an occupational pension arrangement with a normal retirement age of 65, then they must retire and take the benefits. This is simply untrue.
An employee can continue to work regardless of the normal retirement age of their pension scheme, these are not mutually exclusive. It is worth noting, however, that an individual may have a contract that stipulates a cessation date the same as that of the employer-sponsored pension arrangement.
What can I do if I want to continue working beyond Normal Retirement Age?
We recommend early engagement with your employer as there are solutions that can be put in place should you wish to remain on beyond a contractual age, particularly if there is a precedent for such an extension in other areas of the company.
It is now common practice to offer a fixed-term contract to retiring employees. This would normally be for a year and may be extended by a further year, on the agreement of both parties. Your employer will need to ensure a fixed-term contract is quite specific on timelines and duties that apply to you, so as not to set a precedent that may affect other employees now, or in the future.
What happens to my pension contributions if I continue to work?
It should be noted that where an employee continues to work beyond the normal retirement age of the scheme, the employer can simply terminate all future retirement funding by notifying the scheme trustees, without being compelled to replace it with another scheme. This is called a ‘termination of relevant employment’ but not of actual employment. This immediately creates what the Pensions Act defines as a ‘preserved benefit’ over the pension fund (assuming the fund is within Revenue max limits as if they had left service on that date), provided they cease to be an active member for retirement benefits of ALL schemes related to that employment.
The pension scheme becomes a frozen scheme or can come into payment, depending on ones’ individual circumstances. Actual employment can continue as before. Again, this is an area that we would urge members to seek independent pension advice, as each case will have unique circumstances to be considered before making any decisions pertaining to a preserved benefit.
If subsequent death was to occur (pre-accessing of benefits) the pension fund is payable in full to the deceased’s estate; as outlined in the Pensions Act.
A preserved benefit is not restricted to the four times limit (x4 remuneration) *.
This can form an integral part of inheritance tax planning and ultimately reducing the pension proceeds to tax in the hands of the recipient.
*if death occurs of an active member of an occupation scheme; the max lump sum that can be paid out the estate is four times final remuneration and the balance must be used to purchase an annuity.
How do I decide to continue working or not?
The main concern for most individuals when approaching retirement is; will I have enough money to last throughout my lifetime? Especially as life expectancy is continuing to increase. A retirement plan should be put in place well ahead of your proposed retirement date to ensure that you have sufficient provisions in place for your desired retirement lifestyle.
Retirement planning is very complex. We recommend that you speak with a financial planner who will incorporate cash flow modelling into the overall advice process. This will allow you to run various scenarios to ensure you make informed decisions about when you decide to retire.
Another but less spoken about issue is if you are emotionally ready for retirement. Retirement is a massive transition and one which many people struggle with. Putting a retirement plan in place can help smoothen this transition.
Do you need advice on retirement?
Should you as a member of a company pension scheme need assistance to examine the finer details within what might be perceived as a complex pension arrangement, please do not hesitate to contact OpesFidelio Financial Planning Ltd as we can guide you through the complex area of company pension scheme rules.