Your personal finance questions – Can I access my pension early to fund my son’s education?

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Charlie Weston Twitter Email

October 23 2021 02:30 AM

Q I have a personal retirement bond with Irish Life from my previous employer which is no longer in business.

I stopped paying into the pension years ago but in 2017 it was transferred into my name after my employer closed. In 2017 it was worth €17,269, today its worth €20,839. I can't access the fund until I am 50. I am 45 now.

Is there any way I could access the fund now? Our 18-year-old son has started third level and with fees etc, I need it more now than in five years. I have a new private pension with my new employer but obviously that’s for when I’m 65.

A Early retirement from private pensions such as a personal retirement bond is only allowable from the age of 50, according to the head of business development at the Independent Trustee Company Ltd Glenn Gaughran.

The only time funds could potentially be accessed earlier than this would be if you were experiencing serious ill health and are prevented from working.

That is because generally the normal retirement age on a pension scheme is 60 or 65, and the reason tax relief is given initially on pension contributions, is for the sole purpose of saving for your retirement, Mr Gaughran added.

In order to access benefits early, at 50 or over, you need to no longer be working with the employer which the benefits came from, and also have severed all ties with the company – for example, if you were a shareholder.

Given the company has closed and the pension benefits have been transferred into a personal retirement bond with Irish Life, you will meet the early retirement requirements, but that can only be triggered on your 50th birthday, the pensions expert said.

Q I am familiar with the concept of inflation but what is stagflation and how would it impact me?

A In our economy, prices for goods and services can rise and fall. In Ireland, we have seen this occur with the price of petrol, diesel, and home heating oil. It has also happened in respect to the price of property.

Following the so-called credit crunch and ensuing recession, the price of property in Ireland fell by as much as half, according to Frank Conway, founder of financial wellbeing provider MoneyWhizz and a qualified financial adviser. From an economic perspective, the term ‘stagflation’ is where the rate of inflation rises, economic growth slows and, where the rate of unemployment remains steadily high.

Therefore, the word stagflation is a combination of stagnation (economic growth) and inflation (prices). From a personal finance perspective, were stagflation to take hold, it would have a very significant and negative impact on the value of money held in savings, income, pension payments and even employment prospects.

As inflation erodes the buying power of money, the real value of money held on deposit falls in tandem with the prevailing rate of inflation. Income is also impacted as the buying power for each euro earned falls. People in retirement, on a fixed income, will also be vulnerable to the fall in the value of their pension income, Mr Conway said.

Those starting out in life may find it more of a challenge to gain employment. It is still way too early to make any meaningful assessment as to whether we are entering a period of stagflation, he added. What we do know is that economists have developed many fiscal and monetary tools to tackle such economic threats.

Q I lived in the USA for about 15 years. During that time I got married, had a daughter and got divorced. I came home to Ireland in 1995 where I have lived and worked since. I am making my will at the moment and want to leave everything to my daughter. Will my US divorce be recognised here? Will my ex-husband have any claim to my estate?

A Solicitor Susan Murphy, of MakeMyWill.ie, said you should seek legal advice so that the full picture of your situation can be reviewed.

She said it is important to disclose the full terms of your divorce to your solicitor when making your will. It may be the case that provision was made at the time to ensure neither of you would be entitled to apply to court for any share of each other’s estate, but you need to clarify this, Ms Murphy said.

If there is any doubt, you can apply to court for a declaration on the validity of a foreign divorce, under section 29 of the Family Law Act 1995. Also, if your ex has since remarried, he wouldn’t have any entitlement to your estate, the solicitor said.

Your personal finance questions – Can I access my pension early to fund my son’s education?

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