If you have a pension which you’ve left with an old employer, you may be interested in our Frequently Asked Questions;
- Why should I move my pension out of my old company scheme?
- Why not just transfer it to my new employers pension scheme?
- A colleague of mine is transferring his/hers to a Personal Retirement Bond – shouldn’t I just do the same?
- Can I increase this pension by making further contributions to it?
- When can I access this pension?
- What if I can’t find my pension?
- Why should I move my pension out of my old company scheme?
Keeping Track
It’s easy to lose track of your entitlements if you leave them in old schemes. Every year life assurance companies transfer substantial amounts in unclaimed personal pension funds, PRSAs and certain life assurance policies to the Dormant Accounts Fund. Unclaimed benefits from company pension schemes remain in the scheme indefinitely but apart from writing to the last held address generally speaking no major effort is made to locate members so if you have moved address the Trustees may never find you.
Planning
Many people who leave pensions with old employer schemes have very little idea how much income their fund will provide and therefore very little idea how much they should be contributing now in order to have adequate income in retirement.
Company pensions are usually structured so that the member can manage the investment themselves, possibly via a secure pension portal however generally speaking only current staff stay engaged with the management of their pension. The level of engagement from leavers is far lower. Portals often include projections showing the income that may be available from the pension however these projections are usually based on you purchasing an annuity (income for life) at retirement. While there are advantages to going the annuity route, very few people choose it these days. Pension administrators only use the annuity method because it makes the calculation more straightforward but it is very likely to give you the wrong figures. If you decide to move your pension to a product under our management, we can provide you with advice based on real world calculations using reasonable assumptions for investment returns and inflation and personalised to your specific circumstances and requirements and establish a review process to track this annually.
Investment Choice
Many company schemes have very limited fund choice, often as little as five funds and they can be very prescriptive about how you instruct them to amend your fund choice. A Personal Retirement Bond will usually have access to the full suite of funds provided by the Life Assurance company, often more than sixty funds and fund switches can be made with ease in less than a day.
Ease of Administration
You don’t have full authority to make changes to your company pension. For some company pensions the signature of a Trustee is required for even the most minor of issues. We have had instances where client requests were delayed because Trustee signatures could not be obtained due to them being on annual leave.
If you decide to mature your pension from a company scheme, even if the Trustees have already signed off on it, it can currently take over two months to obtain the required forms from the large pension administration companies. If your pension is held in a product under your own control this can usually be obtained in a week or less.
Moving on
Most people who leave an employment don’t want to feel obligated to the their past employer or Trustees and would prefer to have control of their own retirement account. Taking your pension out to a product under your own control means that you can authorise all changes.
- Why not just transfer it to my new employers pension scheme
Sometimes people decide to transfer an old pension they have with a previous employer to their current company scheme. Depending on your circumstances this may not be a good idea. Your pension is subject to the rules of the existing scheme. Transferring it in to your current employers scheme may restrict your options for maturing it down the line. As it stands you may be able to mature your pension under early retirement from age 50 (because you have left the employment), however if you move it to a new employer and you are still working with that new employer when you turn 50, you would not be able to mature it under early retirement.
- A colleague of mine is transferring his/hers to a Personal Retirement Bond – shouldn’t I do the same?
Not necessarily. If you decide to take control of your pension yourself rather than moving it to your current employer scheme your options will usually be to transfer it to a Personal Retirement Bond or a PRSA. There are advantages and disadvantages to both. A Personal Retirement Bond is a product which is designed to store an old pension entitlement. It is also known as a Buyout Bond. A PRSA can also be used to store an old pension. Which is best for you will depend on your circumstances and objectives which may be different to your colleagues.
- Can I increase this pension by making further contributions to it?
No, you don’t make monthly contributions to a Personal Retirement Bond/Buyout Bond. If you don’t have access to a company scheme through your current employer we can arrange a pension for you.
- When can I access this pension?
In many cases you can access your pension from age 50 or earlier in the case of ill health.
Generally you will usually be able to withdraw at least 25% of your pension tax free. If your pension is not substantial in size you may be able to access all of it tax free.
- What if I can’t find my pension?
If you have lost track of an old pension you can use our pension tracing service to find it. Just click here to authorise us to begin the search and provide any information you have about your pension such as the name of the employer and approximate employment dates and any other information you have such as your staff number from the employment.
We recently found a pension entitlement with a value of €121,000 which a client of ours thought he had arising from an employment in the 1990’s. It took repeated requests to a number of pension administration companies over several weeks to locate his pension. If he hadn’t found this now, imagine how difficult it would be to find it when he reaches retirement age in around 20 years time.
If you are interested in discussing this further please give us a call on 01 546 1100, send us your details via our Contact Us form, or book a 15 minute video call with us here.
The material and information contained on this website is for general information purposes only. Neither the writer nor Highfield Financial Planning Ltd makes any warranty as to the completeness, accuracy or reliability of the information or the suitability or availability of products or services, referred to on the website, for any purpose. You should not rely on any information contained on this website as a basis for making any financial, legal, taxation or other decision. The information presented does not include all the considerations which are relevant to the topic discussed as to do so would render it un-readable. When considering any financial issue you should seek the advice of a suitably qualified adviser.
Warning: If you invest in this product you may lose some or all of the money you invest.
Warning: The value of your investment may go down as well as up. You may get back less than you invest.
Warning: This product may be affected by changes in currency exchange rates.
Warning: The income you get from this investment may go down as well as up.
© Eoghan Gavigan 19 November 2021
