# Less than two years of employer contributions



## shipship (22 Oct 2019)

Hi I finished with a company, and under their pension rules, they say they reserve the right to take back employer contributions if the scheme is open for less than 2 years. 

Is there any limitations around this? Someone I know who was in a similar situation with a different company was allowed keep their contributions as the value of the pension was over a certain amount. I can't see anything in legislation about this, so I'm guessing it may have been a company specific policy?


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## Conan (22 Oct 2019)

The Pensions Act says that after two years membership the Scheme must provide a “paid-up benefit” based on both Employer and Employee contributions. However if the member leaves before two years the Scheme Is not obliged to give the employee the benefit of the Employer contribution.


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## Oisin19 (23 Oct 2019)

this is probably the worst rule within pensions. they company are in effect taking back pay because you left before 2 years!


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## Conan (23 Oct 2019)

Maybe, but prior to the Pensions Act there was no compulsory vesting. It was up to each Scheme (Employer) to decide.


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## Coldwarrior (25 Oct 2019)

If you had a pension with your previous employer and transfer it to your current pension scheme then I believe the 2 year rule doesn't apply. It still may not make sense to do this though, depends on the fees etc in the different schemes.


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## W200 (29 Oct 2019)

If less than two years with a company are you legally entitled to reclaim your own pension contributions on leaving.


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## Conan (29 Oct 2019)

W200
Yes but subject to a 20% tax deduction. After two years you must opt for a deferred benefit.


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## W200 (30 Oct 2019)

Conan said:


> W200
> Yes but subject to a 20% tax deduction. After two years you must opt for a deferred benefit.



Thanks


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## fayf (16 Nov 2019)

If you transferred a previous Employment pension scheme,  into your current Employment scheme, then, this service counts towards the 2 years service rule.

Eg: you were a contributor/member of your old employment for say 12 months, and you transfer that, to your current employer’s scheme, the 12 months service is noted, in the files, so if you were made redundant, or you resigned,  after having been a member of your current employer’s scheme for say 14 months, you can transfer all your balance which will include your current employers contributions,as you have 26 months service. Its an often forgotten advantage, of transferring a previous balance into your current employment scheme.
I was recently helping out a friend, who was in this situation, they were being made redundant after 22 months, but were able to keep their current employer contributions, which were over 6k, so it was well worth transferring that old scheme balance to their current employer. However i did hear second hand, some employers will allow you to keep the Employer contributions when you are under the 24 months- unsure of the mechanics of this.


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## nest egg (18 Nov 2019)

Conan said:


> W200
> Yes but subject to a 20% tax deduction. After two years you must opt for a deferred benefit.



Does this mean you could get 40% relief on the way in, and 20% on the way out?


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## shipship (19 Nov 2019)

Thanks for the replies.

How long is normal for a pension admin to explain the possible options? 

Despite some badgering, I've yet to hear anything about my pension yet.


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## fayf (26 Nov 2019)

mojoask said:


> Does this mean you could get 40% relief on the way in, and 20% on the way out?


Thats exactly what this means, only if, you have less than 2 years pensionable service. 

I understand this is frequently used a lot by employees who are here for a specific period or project length, they can load up their pension contributions- get 40 % tax relief on their contributions, and take the proceeds, less 20 % on departure. A downside to this is, if you don’t have 2 years pensionable service, you loose all of the employer contributions. This is returned to the employer by the pensions company.
Generally speaking, its more effective for most people, to transfer the total, into your next employment pension fund, a PRSA, or a Personal Retirement Bond


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## JoeRoberts (16 Dec 2019)

fayf said:


> Thats exactly what this means, only if, you have less than 2 years pensionable service.
> 
> I understand this is frequently used a lot by employees who are here for a specific period or project length, they can load up their pension contributions- get 40 % tax relief on their contributions, and take the proceeds, less 20 % on departure. A downside to this is, if you don’t have 2 years pensionable service, you loose all of the employer contributions. This is returned to the employer by the pensions company.
> Generally speaking, its more effective for most people, to transfer the total, into your next employment pension fund, a PRSA, or a Personal Retirement Bond


 A scheme is not obliged to have a vesting period at all.
The 2 year rule is the maximum period within which an employee can lose the employer contribution and hence it has become the de facto rule. But many employers don't realise it is there and I have seen cases where the employer never actually got the refund from the scheme even though it was taken from the employee's fund.
So worth asking your employer. It is particularly harsh if an employee is let go and this is something that really needs to be challenged.


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## fayf (18 Dec 2019)

Good extra info.

But reality is, in most cases a broker or provider (eg AON) manages the scheme on behalf of an employer, and they are much more in tune with the scheme rules. They have controls in place as managers of the scheme, (and that is their job tbf) which kick in when the typical 2 years membership of the scheme has not been reached and claw back the employers contributions. But this only happens when the ex employee, arranges a transfer, which is  after the employment ceases, and can be years later. That has been my own experience.

i agree, that it would be very harsh if a clawback were to be triggered of employer contributions, in the event of making an employee redundant, and this would certainly be a negotiating point for employees who are under the 2 years membership of the scheme and are made redundant.


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## RedOnion (21 Dec 2019)

fayf said:


> But this only happens when the ex employee, arranges a transfer, which is after the employment ceases, and can be years later.


That sounds unusual. There's legislation that means you must receive a leaving options statement within 2 months of leaving your pensionable job.
Over the years I've left 5 different jobs where I had a pension. Some less than 2 years.
In every single case I received a 'leaving ootions' letter within a month of leave date.


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## fayf (23 Dec 2019)

Yes, an options letter has to be provided, but the default, if no action is taken by the Employee, having received the options letter, is the fund balance, stays where it is, hence, i was referring to “can be, years later”, when the funds are moved, which is typical in many cases.


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## RedOnion (23 Dec 2019)

fayf said:


> and claw back the employers contributions. But this only happens when the ex employee, arranges a transfer, which is after the employment ceases, and can be years later.


fayf, I read the above to mean that the 'clawback' only happens when the ex employee moves their part of the funds?
In my experience, as an accountant for large companies, the refund is made as part of the same process as issuing the leaving options letter, not when the funds are moved. But maybe there's something unique about those 3 pension managers I've worked with? Or maybe I've completely misread your post in which case I apologise.


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## fayf (24 Dec 2019)

RedOnion said:


> fayf, I read the above to mean that the 'clawback' only happens when the ex employee moves their part of the funds?
> In my experience, as an accountant for large companies, the refund is made as part of the same process as issuing the leaving options letter, not when the funds are moved. But maybe there's something unique about those 3 pension managers I've worked with? Or maybe I've completely misread your post in which case I apologise.


All good, we are all exploring here.

In the one personal experience i had of this, where i had just a year or so, membership of a Company Pension scheme, at the time i moved on, i left it there, for almost 4 years, then, i transferred it to my current employer scheme, and it was only at that point, that a recoup of the that previous employer contributions was made.

Maybe it varies, from scheme to scheme.


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