# Key Post:  pros and cons of retirement bonds?



## agencycontractor

Hi,
I had a company pension which I stopped paying into 2 yrs ago as I left the company I was in. THis company was the trustee of the pension. My new employer wasn't  interested in paying into this company pension , so I've setup a standard PRSA pension for myself since then.
So now the pension provider of the company pension is coming back to me asking me what do I want to do  with the company pension now.
They say I can put it in paid up status, or I can put it into a retirement bond, or I  get my current employer to start paying into it.
If I put it in paid up status, it means the company I used to work for remains a trustee of the pension plan, which  is something I don't want.

The only other option seems to be be to place it in a retirement bond. 
So does anyone know anything about retirement bonds?


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s

*Re: anyone know pros and cons of retirement bonds?*

A buy out bond (BOB) is simple a standalone pension fund in your own name and separate from the original occupational scheme.

You may be able to get lower charges on a BOB than by leaving your fund paid-up and invested in the occupational scheme (e.g. one of my own funds is paid up but still attracts the monthly policy fee of c. €3.50 paid via encashment of units even though no ongoing contributions are being made so I'm considering transferring to a BOB to avoid at least this small charge). A BOB may be simpler from an administrative point of view as it is completely standalone, self owned and obviates the need for dealing with the occupational scheme trustees etc. (who might be hard to track down at some future date in some cases). I'm still not 100% clear on the impact (if any) on accumulated vesting periods when transferring to a BOB - e.g. if you transfer from one occupational scheme to another you carry in the vesting period (which is a max of two years these days) but which can secure immediate or expedited guaranteed benefits in respect of employer contributions (as opposed to these being clawed back if you leave before vesting) and I'm not 100% sure that you can still benefit from this by transferring from a BOB into another occupational scheme or if the occupational to BOB transfer is a once off and irreversible measure? (Hope that made sense!).

Not sure if there are any other pros (or cons!). Pay careful attention to charges if shopping around and transferring.


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## Meritas

*Re: anyone know pros and cons of retirement bonds?*

Just checking.  Did you have more than 15 years scheme membership in the previous pension?  If you had less than 15 years you should be able to transfer to your PRSA.  Another consideration is whether or not the previous scheme was Defined Benefit or Defined Contribution i.e., did it promise a benefit related to salary at retirement or was it a commitment to a specified contribution each year.


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## Conan

*Transfer to PRSA*

transferring benefits from an employer sponsored scheme to a PRSA -assuming you have less than 15 years membership in the employer sponsored scheme- is easier said than done.
Under the PRSA rules, you can only transfer your value into the PRSA IF someone (an intermediary or your PRSA provider) is prepared to issue you with a Certificate of Comparison. Only intermediaries with at least €1m professional indemnity can prepare these.
My understanding at present is that most intermediaries and most PRSA providers will not issue such Certificates. In this situation, you must either leave your fund as paid-up or transfer into a Personal Retirement Bond.


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## Meritas

*Re: Transfer to PRSA*

It's fair comment from Conan that intermediaries and providers are reluctant to provide the certificates, probably because it's difficult to charge for it. In a simple defined contribution case the comparison should be straightforward and it might be worth pushing the company giving you options, given you've already established your PRSA.  If the amount is less than €4,000, or equates to a return of your own contributions only, or is in respect of benefits accrued through scheme service less than 2 years, then I believe the Certificate is not required.


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## Brian

*Transfer to PRSA*

Yes, all of the previous contributors have made good points. 
There are two sets of criteria for making this decision.  (a) Pure Financial,  and (b) No-financial concerns.

(a)Financial.  Ask your scheme trustees what your current transfer value is, and what your projected level of pension will be.

Then ask an insurance company or broker what the projected pension would be from a buy-out-bond, assuming that you invest the current transfer value.

This will give a figure to help with the financial aspect.

Make sure that you are looking at like vs like.  If your scheme included a spouses pension and inflation the comparitive buy-out-bond should also do so.  Such calculations are very straightforward and very quickly done on the quotation systems availabel in almost every professional pension brokers office.

(b) non-financial.  In a buy-out-bond you will have some INVESTMENT DISCRETION (eg equity, property or mixed/managed fund).  You also however have the responsibility to pick which fund is most appropriate to you. (brokers can assist with information, but you must choose)

SEVERING TIES with previous employer is a common and valid reason.  But if you were in a defined-benefit scheme with benefits promised, based on your earnings, then you should think hard before pulling out.

CONTROL you make like to have it under your own control, and some of the companies e.g. Eagle Star will give you online access and a PIN no. so you can track progress (downs and ups).

WHERE WILL YOU GO TO GET YOUR PENSION- companies merge, cease trading relocate and change trading names as indeed do brokers and possibly trustees.  If you have your own buy-out-bond you remove the hassle of tracking things down later, or if you were in poor health or diminished capacity , could your dependants know where to go.

Further help - Who set up your PRSA ?  altenatively go www.PIBA.ie .This is the Website of the Professional Insurance Broker Association.  There you can find an adviser in your area.  They should have either the FLIA or Pensions Diploma qualification from the Life Insurance Association, (or equivalent).

You can double check on the broker by making sure he is regulated by the Irish Financial Services Regulatory Authority (IFSRA)


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## agencycontractor

*Re: anyone know pros and cons of retirement bonds?*

Hi There,

Thanks for the replies.
To answer your questions .
I've had this pension for about 5 yrs.

Excuse my ignorance,but as regards the queries on defined benefits I'm not sure what you mean here . I'll have to reread the pension documentation. 
 There were things such as, if I became sick /ill and couldn't pay my premiums , they pension company would pay my premiums. There was a critical illness benefit as well where if I was unable to work due to illness, I would get an income from the pension company that would be 75% of what my income would be at that time.  Is this what you mean by defined benefits?  The broker was pointing out that I should consider canceling these insurance type options as they were  reducing the overall value  of the pension.

As regards transfering the pension  to my PRSA, I was thinking in terms of not including it with my PRSA as I wouldn't  have all my eggs in one basket and will be therefore spreading my risk in case certain funds didn't perform. But reading your comments you seem to think it would be a good idea to transfer the funds to the PRSA . Am I correct in thinking that?


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s

*Re: anyone know pros and cons of retirement bonds?*



> Excuse my ignorance,but as regards the queries on defined benefits I'm not sure what you mean here



A DB scheme is (in simple terms) one in which a certain level of retirement income is guaranteed as long as you are contributing to the scheme for a certain period of time. In contrast a Defined Contribution scheme is one in which the level of requirement income is dependent on (a) how much you contribute over the years and (b) the performance of the assets in which this money is invested ("the stock markets"). It should be pretty obvious from your scheme booklet which type your scheme is.


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## agencycontractor

*Re: anyone know pros and cons of retirement bonds?*

Ok 
I understand now .
 Its definitely a defined contribution scheme.


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## Bernard

*A PRSA Is Your Best Bet*

Go the PRSA route - no transfer cost and full suite of retirement options will be available at retirement age. 

Choose another PRSA provider if you want diversification.  You can hold many of these at the same time if you wish. 

You'll have to wait until this Certificate issue has beem sorted out to do this however. 

Bernard


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## agencycontractor

*A PRSA Is Your Best Bet*

Thanks for your reply .

I was wondering what do you mean when you say:

"no transfer cost and full suite of retirement options will be available at retirement age"

What do you mean by  full suite of retirement options?

SO is there certain things I wouldn't have access to at retirement if I  transferred my pension to a buy out or retirement bond. If so what are they?


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## <A HREF=http://pub145.ezboard.com/baskaboutmoney.s

*Re: A PRSA Is Your Best Bet*



> What do you mean by full suite of retirement options?



I presume what is meant is the possibility of up to a 25% lump sum tax free and the ability to reinvest some or all of the fund in an ARF/AMRF as opposed to the old situation in which one was forced to buy an annuity at retirement regardless of one's future plans, prevailing interest rates etc.? I didn't think that there were any differences on this front between most or all occupational schemes, BOBs, personal pension plans or PRSAs? I certainly didn't think that PRSAs necessarily yielded more benefits or choices in this context? I would be wary of taking a blanket recommendation such as the one above without more clarification and understanding of all the implications, costs, benefits and options. If in doubt you might want to obtain independent, professional advice and guidance on this issue.

Check the Pensions Board website for more info and FAQs on this stuff:

www.pensionsboard.ie/

This guide in particular is pretty good in terms of the different pension and retirement options available:

[broken link removed]


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## agencycontractor

*Transfer to PRSA*

Hi  "Under the PRSA rules, you can only transfer your value into the PRSA IF someone (an intermediary or your PRSA provider) is prepared to issue you with a Certificate of Comparison. Only intermediaries with at least €1m professional indemnity can prepare these."


Does anyone know what a Certificate of Comparison is, whats its for and why you need professional indemnity to prepare these and why PRSA providers are not that pushed about providing them?


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