moving from co with dc scheme to one with db scheme

[Mad]

I am leaving a job in which I pay 5% of my salary into my pension (defined contribution) and my employer pays 10%. In my new job there is a defined benefit pension scheme. What does this mean exactly? Can I bring my current pension with me?
Thanks.

 

[rainyday]

Re: Pension

What does this mean exactly?

It means that the pension you will recieved is based on your years of service, not on investment return from the amount you have contributed (like your old 'defined contribution' pension).

Can I bring my current pension with me?

Unlikely, though I'm open to correction. I think your choices will be to leave your money in your old employers pension fund until you retire, or transfer your money into a bond with one of the life insurance companies, where it will grow (hopefully) until you retire.

 

[Mad]

Pension

Thanks - a couple more questions!

MY new pension is therefore very dependent on my length of service to my new employer. Can I make any contributions towards this myself? Can I take any of it with me if I should ever leave? Can I keep the pension with my old employer open as well as having the new pension with my new employer?

 

[rainyday]

Re: Pension

Can I make any contributions towards this myself?

Your new employer probably has an AVC (additional voluntary contributions) facility to allow you to make additional payments which will provide a 'top-up' pension for you on retirement. Check with your new employer.

Can I take any of it with me if I should ever leave?

You don't take it with you, but the benefit still exists when you leave. So if you leave after e.g. 10 years service, you will have earned approx one-quarter of a full salary to be paid to you when you retire. (very rough calculation - see the rules of your new scheme for details).

Can I keep the pension with my old employer open as well as having the new pension with my new employer?

When you say 'open', do you mean can you keep contributing to the old one? No - once you leave, you can't make further contributions.

Have a read of the Guide to understand your overall investment options. Remember that once you put money into your pension, you won't be able to get it out until you retire - regardless of what happens in your life.

 

[ajapale]

Defined Benefit Pension

Quote:

>>Remember that once you put money into your pension, you won't be able to get it out until you retire - regardless of what happens in your life.>>

Some Defined Benefit Scemes (and perhaps Defined Contribution Schemes too) have an " Ill health retirement" option which allows an employee who is in very poor health to retire early on reduced pension. The amount of the reduction is the social welfare disability pension.

If your new company and your old company are in the public sector (including semistates) if might be possible to transfer one one to another.

There appears to be two types of AVC's associated with DB schemes. Type 1 - allows you to buy service (so your final pension is based on more years). Type 2 - allows you to invest in a parallel defined contribution scheme.

As a rule if you have the opportunity to join a db shceme you should do so.

Ajapale

 

[ajapale]

Re: dc to db scheme

Im doing some housekeeping and tidying up some old but interesting questions. This one from 2003 is interesting in that there still are people who are moving employment from employers who offer a dc scheme to employers who offer a db scheme. For example medical staff who move from a private hospital back to a public hospital.