Non Contributary Defined Benefit Pension Scheme

[apd]

Hi,

I am considering moving job at the moment. The new employer has a Non Contributary Defined Benefit Pension scheme, which allows for AVC by employees.

I am 30. So if remained with the new employer until retirement with 30 years service, would this not entitle me to the maximum 2/3 final salary. And if so, why would I or any other employees wish to make AVC's. Is it for employee who were older when joining?

Also I am currently in a defined contribution scheme. Can/should I transfer this to the new non contributory scheme?

If I ever leave the new employer, is it possible to take funds from a non-contributory pension scheme with you to a future employer, the way it is possible with a defined contribution scheme?

Thanks

 

[Conan]

Re: Non Contributary Pension

Assuming 30 years service will not automatically qualify you for 2/3rds pension. The actual pension depends on service and the accrual rate. If for example the accrual rate is 1/60th of Final salary for each year of service, then you would need 40 years service to get a 2/3rds pension.
You also need to consider the scheme's Normal Pension Age. These are generally 65, so you would potentially complete 35 years service, thus equating to 35/60ths pension.
The reasons an AVC facility might be included could be :
- to allow those with less than full service to fund additional benefits
- to allow all members fund additional benefits if the main scheme does not provide maximum benefits e.g. if there is no spouses pension on your death in retirement, if there is no indexation of pension in payment, if there is an offset for the State Social Welfare Pension etc.
If you were to leave this Co. in the future, provided you have at least 2 years membership, then you would be entitled to a benefit based on your service. This could be transferred to a subsequent employers scheme or transferred to a Buy Out Bond or left with the old employers scheme. The fact that the scheme is non-contributory does not affect your vesting entitlement.
Hope this helps.

 

[ajapale]

Hi adp,

I've changed the title to relfect your question more accurately.

Are you sure that the new company operates a non contributary Defined Benefit (Final Salary) scheme?

Also, in the event that they do, are you sure that the will allow you to become a member?

aj

 

[maro]

Another reason to make AVCs is because typically not all earnings are pensionable (bonus,bik,shift,overtime)by the company. There may also be an offset from your salary which is not pensionable. However under revenue limits you are allowed to take all these into account for pension purposes. And yes you can transfer defined contribution to defined benefit and vice versa, where these are revenue approved pension arrangements, which they invariably are. I work in pensions and we would advise people in your age bracket that while AVCs are a good tax efficient vehichle, don't forget they're for the long term and cant be cashed in a lot of cases