Informed Decisions are one of Ireland’s only remaining independent financial advice firms. We specialise in retirement & investment planning for successful individuals, so that our clients only have to retire once.
Retire successfully with Informed Decisions.
December 1, 2025
Most couples do best with a mix. Using the standard rate band for pension income keeps tax low and avoids draining savings too fast. Leaving everything until 66 often leads to larger ARF withdrawals taxed at 40 percent.
Retirement planning gets confusing fast when you are deciding whether to draw income from your pensions (PRSA or ARF), or leave the pension pot untouched for years.
You will hear strong opinions both ways! Some people insist on holding off until mandatory ages of 65, 70 or 75, depending on the scheme.
Others argue for early drawdown. Both approaches can make sense, depending on your situation!
So, this week I will share the following with you:
The right approach to drawing or not drawing retirement incomes typically depends on:
Below I outline and give some detail on 3 potential household setups and scenarios.
These are high-level and I've not gone into granular level for now, but the principles will hopefully be of value to your own scenario.
They show how your income mix shapes your tax outcomes and your long term flexibility.
You are each 55 years of age.
You are already retired :)
Each partner has €800,000 in pensions and joint €500,000 in savings or investments.
Yor living costs are around €70,000 a year.
And note that we assume their pensions are in PRSAs (Personal Retirement Savings Accounts) or Buy Out Bonds (BOBs) or Deferred Occupational Schemes, and that the are obliged to start taking income from them by 70 (for BOBs) or 75 (as is the case with PRSAs). If you have a Defined Benefit (DB) pension - you'll usually be getting your income at a set date whether you want it or not!
Síle and Marvin here are in a good spot (fictitious characters!):
They have strong rental income and large pensions of €800k each or €1.6m total, and have made the bould decision to pack-in work, done with it!
The key question they may be asking is whether they should draw any pension income before they are obliged to do so at 70 or 75 etc.
Tax on €60,000 rental income
Here I assume that the income is under joint assessment and essentially split €30,000 each.
Standard rate (20%) band available is €83,000.
Income tax at 20 percent
• 60000 at 20 percent gives 12000
• Less married credit 4000
• Income Tax c€8000
USC
• Total c€1,333
PRSI
• 60000 at 4 percent = c€2,400
They spend €70,000 per year on doing stuff and things, so €24,000 could come from deposits or investments to cover the shortfall.
They do not need pension income yet, and their pension funds can stay fully invested, for now!
Rental income €60,000
State Pensions €30,000
Total €90,000
Standard band €53,000, and raised by the lower income up to €35,000.
Lower income is around €45,000, so band becomes €88,000.
Income tax total here is therefore c€14,000.
USC on €90,000 income is €3,240 and there is no PRSI once State Pension begins.
Their spending is now fully covered by rental income and State Pensions.
They still do not need ARF income, unless they really want to or need to for gifting or other purposes!
Future ARF withdrawals, all things being equal are likely to be surplus.
• Before crystallising, they are not pushed to take taxable pension income in the form of 'imputed distribution'.
• Rental income and later State Pensions cover needs to live a comfortable and enjoyable lifestyle
• Pensions remain invested for longer, hopefully growing upwards totally tax free - and payable as tax free proceeds in event of death of either
• ARF withdraws stay optional and strategic
You can ask yourself
• Do you actually need pension income in your fifties?
• Or should you let the pension grow?
Partner A (Grainne) earns €50,000.
Partner B (Timmy) has no income.
Both hold about €800,000 in pensions, and have €500,000 savings.
Spend target is €70,000.
The unused band of the non earning partner is the key question.
Income tax on Grainne's €50,000
• All taxed at 20% = €10,000
• Less married and PAYE credits €6,000
• €4,000 Income Tax on that income.
Plus USC of €1305 and PRSI c€2,000
Net income about €44,950.
Lets then say that Timmy draws even €25,000 from his pension pot voluntarily.
Total income becomes €75,000.
Standard band
• Base €53,000
• Raised by lower income €25,000
• Total Income Band €78,000
75000 taxed at 20%
• Gross €15,000
• Less combined credits €8,000
• Total Income Tax about €7,000
And USC c€2,040
Net income about €65,960.
• Income rises close to the target without touching savings, and doing so tax efficiently
• The non earning partner band and PAYE credit are finally used
• Savings stay intact
• Future ARF size reduces gently (which can balance lifetime tax rates)
• Later tax spikes are avoided when two State Pensions land on top of forced ARF draws at that time in future
A simple question to consider in this type of scenario:
• Is one partner band sitting idle?
If yes, modest pension drawdowns at 20 percent (less credits/allowances) can be very efficient.
You may end up with a larger ARF and bigger mandatory withdrawals. Combined with State Pensions, that can push much of your income into the higher rate. Taking small, structured withdrawals earlier often reduces lifetime tax.
Both age 55.
Each holds €800,000 in pensions and €500,000 in savings.
Spend €70,000.
Each partner draws say €35,000.
Total pension income €70,000 Gross.
Standard band
• Base €53,000
• Raised by lower income €35,000
• Total €88,000 standard band, so all income here is inside the 20% band.
Income tax
• €14,000 gross income tax
• Less credits €8,000
• Net Income Tax c€6,000
Plus USC of around €1,650
• All pension income taxed at 20% instead of 40%
• Combined rate about 11% on the €70,000
• Savings remain available for shortfalls and once off costs
• Low draw-down rate on the ARF so ARF reduce slowly, easing future forced drawdown and income needs
• You avoid a sharp Income Tax problem in your late sixties!
• Pension pots may grow a lot, which is a good thing of course, but
• Required drawdowns of say 5% could see income reach and exceed €100,000, plus
• 2 State Pensions add over €30,000
• A fair chunk of the income taxed at 40 percent
Drawing some pension income early
• keeps you in the lower band, and uses allowances and credits potentially available
• reduces future forced draws
• spreads tax more evenly across life
You do not need a perfect formula, and despite the above analysis, it can be self-defeating to over-analyse all this!
Rules, rates and your needs will change over time, so what I do encourage is that you don't simply take pension income when you think you are meant to, and instead do some analysis to see if there are obvious opportunities or threats to your tax efficiency and future needs.
It is important to understand how your income sources interact with the Irish tax system!
Key points:
All of the above scenarios are 'nice to have' aspects to navigate, no question. But navigating them smartly can be the difference between a retirement full of opportunity and choice and one with much less of these desirable aspects!
I hope it helps.
Paddy Delaney
The content of this site including blogs and podcasts is for information purposes only. Everybody’s financial situation is different and the content we share on our site and through podcasts may not be applicable to you.
The articles, blogs and podcasts are not investment advice. They do not take account of your individual circumstances, including your knowledge and experience and attitude to risk. Informed Decisions can’t be held responsible for the consequences if you pursue a course of action based on the information we share
When you need it, or when using your tax bands efficiently would cut your overall tax bill. There’s no fixed age — it depends on your income mix.
Informed Decisions are one of Ireland’s only remaining independent financial advice firms. We specialise in retirement & investment planning for successful individuals, so that our clients only have to retire once.
.svg)