Media Q&A: How can I limit the tax bill I might face when drawing down two pensions?


Published  31 July 2023
   2 min read

Consumer Question:

I’m 50 and would like to retire at 55. While I have a pension through work, I can only access it at 65. I own two rental properties – both will have their mortgages paid off by the time I’m 55. So I’m intending to live off the rental income if I retire then. The mortgage on my family home will also be paid off by the time I’m 55. Would you have any advice about how I can make sure to get myself into a financial position to retire at 55? Is there anything else I should do to prepare myself for an early retirement? And would it be a mistake to retire so early?


Answer from Mark Reilly, Pension Proposition Lead at Royal London Ireland

You seem to be in a strong financial position regarding your plans to retire early. The income you expect to earn from your rental properties will certainly prove valuable, as will your plans to have your mortgaged debt cleared by the time you are 55.

In addition, your ability to access a work pension at 65 will boost your retirement income at that stage of your life.

While all seems to be in hand, it’s worth noting that like anything in life, the future is never 100 per cent certain, so be mindful that you might need to make some tweaks to your retirement plan along the way. You might need to have a contingency plan in case your financial circumstances were to unexpectedly change in the coming years due to, for example, illness or redundancy.

Be sure that the work pension you can access at 65 is adequately resourced and will deliver the retirement income you are expecting from it. If the income falls short of your expectations, you may need to save more into this pension before you retire, and/or postpone your early retirement.

People often underestimate the amount of money they need to have saved up for retirement, as well as the amount they will spend at that stage of their lives. When thinking about how much you need to fund a comfortable retirement, plan your retirement spending carefully so that you don’t run out of money too quickly. Weekly budgets can be hugely helpful in this regard. In addition, prepare for the expenses that you might face in the latter part of your retirement, such as healthcare or nursing home care.

The rental income will provide ongoing financial support, which is great, but be sure to consider any expenses associated with those properties such as maintenance, insurance and tax. This will help you determine whether that level of rental income is sufficient until you can access your work pension at 65. There could be periods when your properties may not be able to be rented out. It would be important to have sufficient savings you can access during such times.

If you have any other debts, such as credit cards, overdrafts or credit union or car loans, it is important to clear these before you retire too.

Early retirement often brings opportunities to travel and spend more time with family as well as to explore new hobbies. There can also be health benefits to retiring early, particularly if you have a stressful job. However, there can be a lot of hours to fill when you retire so for many people, work gives them a sense of purpose and identity, as well as a daily routine – all of which can be lost at retirement unless adequate preparation is put in. So plan your early retirement well and have a positive attitude too, as this will help immensely.




This question was submitted to and first published by The Sunday Times


About Royal London Ireland

Royal London Ireland has a history of protecting its policyholders and their families in Ireland, and recently launched a new Pensions business in Ireland. Our business heritage in Ireland is nearly 200 years. The Caledonian Insurance Company's first office outside Edinburgh opened on Dame Street, Dublin 2 in 1824.

Today, Royal London Ireland is owned by The Royal London Mutual Insurance Society Limited – the largest mutual life insurance, pensions, and investment company in the UK, and in the top 25 mutuals globally, with assets under management of €178 billion, 8.6 million policies in force, and 4,100 employees. Figures quoted are as at 30 June 2023.

Royal London Ireland’s office is based at 47-49 St Stephen’s Green, Dublin 2.