Your options at retirement may include taking a tax-free lump sum or receiving a pension, which is often provided by an annuity. You could transfer some or all of your retirement savings to an approved retirement fund (ARF), you could take a taxable lump sum, or you could arrange for payments to your dependents.

While many employers have their own retirement ages, there is no set age for retirement in employment law. 65 is of course the age at which most people retire, though there are many circumstances in which you can continue to work in your late 60s and beyond. 

‘Normal retirement age’ is defined as the age at which you can retire and take your full benefits under an occupational pension scheme. As the Pensions Authority points out, it can also refer to the age you expect to retire under a personal retirement savings account (PRSA) or a personal pension, which also known as a retirement annuity contract (RAC).

With PRSAs, retirement benefits can be taken from age 60, and there’s no upper limit. For existing RACs, retirement benefits can be taken from age 60 up to age 75.

Note too that there are a small number of professions where Revenue will permit retirement before age 60; certain sports people for example.

What about early retirement? Most pension arrangements in the private sector permit members to retire early in certain circumstances. However, the benefits you receive are likely to be lower than they would otherwise be at normal retirement age.

In occupational pension schemes, early retirement is generally possible with the employer’s and/or trustees’ consent from age 50 onwards. Likewise, under PRSA arrangements, early retirement from an employment is also possible from age 50. Under personal pension arrangements, retirement benefits can be taken from age 60.

Ill health can of course force early retirement, and the system allows for this. The onset of a permanent illness or disability that prevents you from working would have serious financial consequences, and most pension arrangements allow members to retire due to ill-health at any age in certain circumstances. Alternatively, they may incorporate some form of disability insurance.

If you don’t want to retire, this can usually be facilitated too. Most pension arrangements in the private sector permit members to retire after normal retirement age in certain circumstances. Moreover, the benefits you receive are likely to be higher than they would otherwise be at normal retirement age.

Virtually all pension arrangements allow you to take a tax-free lump sum within certain limits at retirement. Most people avail of this option. You may also be able to take an additional lump sum, though this will be taxable. Different rules apply to the amount of cash you can take out of a pension arrangement depending on the type of arrangement you have.

For personal pensions, PRSAs and occupational pension scheme members transferring to approved retirement funds (ARFs) at retirement, it’s generally possible to take up to 25% of your fund as a tax-free lump sum, subject to the usual Revenue limits. 

If you’re a member of an occupational pension scheme with twenty years’ service or more, you can generally choose to take a lump sum of 1.5 times your final remuneration, if higher, provided that your residual benefits are taken in the form of a pension; that is, you don’t wish to transfer residual retirement funds to an ARF.

As always, you should seek information from your pension provider about the retirement options available to you as your retirement approaches.

Then you have the pension itself. The Pensions Authority says: "The main purpose of pension arrangements is to provide additional income in retirement over and above that which is available from the State. The amount of pension you receive will depend on the type of arrangement you have and decisions you make at retirement. Pensions are normally paid monthly from retirement for the rest of your life."

 If you have a PRSA, a personal pension or are a member of a company defined contribution scheme, your pension will depend on the amount of your retirement fund left after you have taken any lump sum. In defined benefit schemes, the pension you receive will depend on the rules of the scheme. Your pension will be based on a formula, usually linked to your service and salary.

If you’re lucky enough to be a member of a defined benefit scheme, you shouldn’t have to think about whether or not you need to by an annuity, which is a series of pension payments, normally monthly, until a particular event occurs. Annuities are normally purchased by payment of a single premium to a life assurance company.

If you’re a member of a defined contribution scheme however, buying an annuity may make financial sense. The important thing is to take advice when considering your retirement options, especially when it comes to annuities.

Pension increases in retirement are important as they help to keep your payments in line with inflation, but of course, not all pension arrangements include pension increases. If you are a member of a defined benefit scheme, depending on its rules, you may have no increases, fixed rate increases, increases at a rate linked to inflation or salaries, or increases that are discretionary and may be paid if the scheme can afford them.

If you buy an annuity at retirement, you will be able to decide whether it remains level or increases during its term. However, the important thing to remember is that adding pension increases has a cost attached and this means that your starting pension income will vary according to the options that you select. You will also be able to choose whether to ensure your pension is guaranteed to be paid for a set period, even if you die during that period. You can usually select a ‘guarantee period’ of up to ten years.

The golden rule here is to take advice as your retirement approaches. What you do with what you’ve earned will have a very significant impact on your life and lifestyle in retirement.