What to do with pension on leaving employer?

[LonseaLM]

I have a pension through Irish Life that was set up with my previous employer. The balance is roughly €60k but since I have now left the company I need to decide what to do with the money. Irish Life sent out a letter which tbh I found quite confusing. I understand I have two options:

1) Deferment Option -> Basically leave the money where it is, I can't contribute more.
2) Transfer Option -> I can either transfer it to a buy out bond or transfer it to my new employers scheme.

The problem is my new employee does not offer a pension scheme at the moment but is hoping to add one in the next 6 months or so.

Question
1) Should I just leave it with Irish life using the deferment option, then transfer to the new scheme when it is set up?

 

[Conan]

You could just leave it where it is and end up with two different funds when you eventually join your current Employer's scheme,
Or
You could transfer the value into your new scheme when you join that scheme
Option 1 gives you a bit of manager diversification (assuming new scheme is not with Irish Life)
Option 2 would consolidate your funds with a single manager.
You might also need to consider the fund management charge under each scheme.
Probably best to wait until you actually join the new scheme and then decide.

 

[ClubMan]

What are the charges like on the existing pension?
Could you get lower charges on a buy out bond?
Also, with a buy out bond you cut any ties with/dependence on the old employer's scheme - e.g. chasing down trustees in years to come.

 

[Steven Barrett]

What are the charges like on the existing pension?
Could you get lower charges on a buy out bond?
Also, with a buy out bond you cut any ties with/dependence on the old employer's scheme - e.g. chasing down trustees in years to come.

That can be important. Especially if the company goes into liquidation and the trustees become the liquidator. Although with the new trustee rules, the time of the company being the trustee is a thing of the past, with professional trustees being appointed. Can still be an issue if we are talking about decades.

Another reason is Irish Life. Their funds aren't very good and don't compare favourably with other fund managers in the market. For the largest insurance company in the country, you'd think they'd have a good fund management team. How they managed to capture the group pension business with such poor fund performance is shocking.


Steven
www.bluewaterfp.ie

 

[GSheehy]

Another reason is Irish Life. Their funds aren't very good and don't compare favourably with other fund managers in the market. For the largest insurance company in the country, you'd think they'd have a good fund management team. How they managed to capture the group pension business with such poor fund performance is shocking.

The tied-agent company of choice, for banks.

Gerard

www.prsa.ie

 

[ClubMan]

Another reason is Irish Life. Their funds aren't very good and don't compare favourably with other fund managers in the market. For the largest insurance company in the country, you'd think they'd have a good fund management team. How they managed to capture the group pension business with such poor fund performance is shocking.

I presume you mean their actively managed funds? Are their index tracking funds any better?

 

[Steven Barrett]

I presume you mean their actively managed funds? Are their index tracking funds any better?

For retail clients, they automatically funnel them into their MAP funds, which are expensive and underperform their rivals.

Their index funds don't track known benchmarks such as the MSCI World Index for a global index. They created their own index to track, which they still manage to miss. I wrote an article about tracking error four years ago and you can see how far out they were on an index they created themselves. They could have improved since then, I don't track their index, I use well established global passive fund managers who track the MSCI World.

Tracking Error - Bluewater Financial Planning

Passive Funds and ETFs are hugely more popular these days than in the past. People believe that markets in efficient and that news about a company is quickly reflected in its share price, whether the news is good or bad. When investing in a passive fund, although the fund manager doesn’t have to...

www.bluewaterfp.ie

Steven
www.bluewaterfp.ie

 

[ClubMan]

Thanks Steven.