old Previous Defined Benefit Pensions

Since the Legislation changes in June 2016, it is now possible to transfer both types of pensions from your previous employers. Prior to this recipients of defined benefit schemes did not have this transfer option. Many semi state bodies that offer defined benefit pensions to their employees are now offering very lucrative pension packages for people who wish to transfer them of the scheme. These include Eircom, An Post, Intel, Bank of Ireland, AIB to name a few. The main benefit of transferring is early access and a significantly larger Tax free lump sum as well a pension benefits to your family on death.

The best way to find this out is request an up to date Annual benefit statement from your ex employer. They are usually sent out to all once a year in the post. This statement will tell you;

1. How much your pension is worth,

2. What fund it is invested in,

3. The management charges applied to your fund by your ex employers pension fund,

4. The various transfer options mention above. In relation to Defined Benefit pensions schemes, most Annual Benefit statements that are sent out to individuals do not have the new Alternative pension transfer option. The new option has to be specifically requested. (See below). Many HR and Accounts/pension departments within these companies are unaware of this new option, so it is advised that you specifically request this new option. The easiest way to do this is to ask a Qualified financial advisors who specialize in pension transfers to get this information on your behalf from the pension trustees.

In most cases (especially with Defined Benefit pensions), if you die after you start drawing down your pension, most if not all of your benefits dies with you. If you decide to transfer your deferred pension out of your previous employer scheme, then there are more tangible benefits left to your family upon your death.

Leaving your pension in your previous employer’s scheme can restrict what you can do with your pension money. If you transfer your pension out, you have the a lot more investment choice. Some of these are these investment choices are as follows

• • Invest your pension in a standard managed fund of an insurance company of your choice e.g. Aviva, Zurich, Irish Life etc. This can be a low, medium or high risk fund, depending of the level of volatility you are comfortable with,

• • Use some or all of your money to invest in the stock market

• • Invest in a local startup company with huge growth potential

• • Buy property with your pension fund
  • Buy a guaranteed income for the rest of your life

Getting divorced or separated can have significant implications on your pension fund. It is advisable to talk to a financial advisor and/or a solicitor to go through the best option for you in this situation.

If your pension is a defined benefit pension and you would like the security of having a guaranteed income for the rest of your days 9 (no matter how long you live), the best decision for for is to leave your pension with your previous employer and not transfer it out.

This point is all speculative but still worth considering. Many pension schemes of very reputable companies have significantly changed the rules of the scheme which can have a very negative effect on ex employee pension values.

For example, Bank of Ireland, AIB and Aer Lingus over the past few years have all changed its pension scheme from defined benefit to defined contribution. This resulted in a significantly reduced package for its employees. Alternatively, if your ex employer gets into financial difficulty and is forced into liquidation, your pension could also be adversely affected. Waterford Crystal is a prime example of this.

If your ex employer has a defined benefit scheme and is underfunded (which many of them are), they have the right to significantly reduce your pension benefits.

If you received redundancy in your prior employment, there may be significant implications to your pension tax free lump sum that you are entitled to from that pension.

If you decide to leave your pension in your previous employer scheme or if you transfer it into your new pension scheme, the access is restricted to the Normal Retirement age of that particular scheme. This is usually age 60 or 65. If you transfer your pension into a buyout bond in your own name, you can get access to this money at age 50 onward. If you have a defined benefit pension, you usually can significantly increase your tax free lump sum by transferring.