# Help to choose a pension bond



## Beamie (30 Oct 2008)

Hi all,

I would appreciate any advice and information to help me investigate / choose a supplier for a pension bond.

I am interested in information about where I can buy a pension bond, what funds I can invest in, charges, historical information about performance of various managers and funds.

My previous employer's DB pension scheme is being wound up (Motorola, shut down last year) and I have the options of 
A. moving my transfer value to my new employer's pension scheme
B. buying a pension bond
C. it will be moved to a default pension bond (Irish Life, Consensus Lifestyle) if I don't do A or B
(I don't have the option of moving to a PRSA because I worked there for over 15 years).

I am inclined to put my old pension transfer value in a separate pension bond rather than put everything in my new employer's pension scheme.  Probably somewhere with a range of funds so that I can control where the pension is invested.

I have read through the key posts and the recent posts.  The most relevant pointer I could find was "Lump Sum Investments" in "Best Buys - Pensions", but the links don't seem to help with with my search for a pension bond.

I am trying to arrange to get some independent professional advice here in Cork, waiting to make contact with the person who has been recommended to me.  Meanwhile I am doing a bit of reading to try to get up to speed a bit, get an idea what I want to do, what to look out for, what questions to ask.

Thanks for any help with this.


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## LDFerguson (31 Oct 2008)

Most Irish pension providers offer Buy Out Bonds so you have a wide choice of funds.  It is also possible to set up a self-directed Buy Out Bond where you can invest in shares (or property if your fund is large enough) of your own choosing, or a mix of managed funds and self-directed investments.  

Selecting a Buy Out Bond is the same as selecting any other form of pension or investment product, so make sure you are aware of charges and that some brokers will offer reduced charges on Buy Out Bonds, which can be lower than what the providers offer directly.

You should choose the investment fund in the same way as you would choose any other pension investment, i.e. by reference to your age, investment experience and appetite for risk.  

A Buy Out Bond is a stand-alone pension investment, i.e. you can only invest the proceeds of the Motorola scheme, in your case.  You cannot add more monies to it.  

Retirement options will be determined by the retirement options that applied to you in the Motorola scheme, although you will have the option to withdraw your benefits from age 50 onwards without reference to the scheme trustees.   

See also [broken link removed]. 

Hope this helps.


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## Beamie (16 Nov 2008)

Thanks Liam (LDFerguson) for your information and advice.

I have now completed choosing a pension buy out bond and I thought it would be a good idea to post some summary information that might be useful to others.  I have no expertise in finance or pensions, so corrections / improvement are welcome.

Quick recap:
- the pension scheme in my previous job is shutting down so my benefits (transfer value) must be moved
- my only options were transfer to my new employer's pension scheme or buy a pension bond (buy out bond)
- unfortunately no PRSA option because I have over 15 years in the old pension scheme.

I got independent advice from an Authorized Advisor (I asked an accountant I know and trust to recommend a local pension advisor).

Based on advice in various places here on AAM, I arranged to pay the advisor directly rather than by commission.  I felt that this got me unbiased advice because he had no financial gain from his recommendation.  I also gained the difference between the flat fee and the commission.

I did some homework myself but the advisor / broker had access to consolidated information about the various pension buy out bond products: the costs involved, including commissions, and investment funds available.  I couldn't find this information myself.  The commission info was particularly interesting & useful.

I chose to go with Eagle Star Matrix Funds, got 102% allocation (105% + 2% commission - 5% bid/offer spread).  The management fees are 0.75% for all matrix funds.

Some of my ex-workmates did the same as I did, while others chose to transfer to their new employers' pension schemes, which had the following advantages:
1. reduced management fees (subsidised by new employer) 
2. reduced vesting in new pension scheme (keep employer's contribution if they leave within the first 2 years)
3. simpler to have all pension stuff in one place

I think I would have chosen to move to a PRSA if I had the option.  Those who did got 100% allocation (seems to be required by law in case of a lump sum transfer) and the usual added flexibility at retirement.

Finally, on choice of funds, I put most of my transfer value into the Deposit Plus Fund (cash) initially, with the intention of moving into the Balanced Fund in stages over the next 12 months, rather than invest over 15 years pension all on one day.

I hope this summary is useful to somebody in future.  I think I would have found it useful myself.  I have no financial expertise so take it with a grain of salt.


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## Dave Vanian (16 Nov 2008)

Hi Beamie, 

I think that's a very useful summary.  Thanks for posting it.  

I take it your transfer value was between €50,000 and €150,000 as I know Eagle Star have bands of allocation rate depending on the size of the transfer value and 107% is for that amount.  

If I may be pedantic for a moment, can I just point out that the bid/offer spread cannot be deducted as a percentage from the allocation rate?  It makes a very small difference.  

107% allocation rate x 95% (effect of 5% bid/offer spread) = 101.65% effective allocation rate after charges.


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## Beamie (17 Nov 2008)

Hi Dave,

Yes, my transfer value was between €50,000 and €150,000 , hence the 107% allocation.

Agreed and understood that my subtraction of the 5% is too simplistic.  Thanks for the clarification.  Anybody I have spoken to does the rough approximation of (107% - 5% bid/offer spread), but your better description 
       107% allocation X 95% = 101.65%
explains why you don't quite get that.

Thanks again.


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## newtogame (8 Dec 2008)

My husband will have a defined benefit pension of just 27 years on retirement ans we want to improve our retirement fund.We are paying a small amount into AVCs but we feel they are not performing well and we would like to secure our retirement.We are thinking of saving 1800 euro per month in total as we are allowed 30% of salary at this stage.The charges are 0.86% for the managed fund plus a 3.5% charge at present.Any advice please.


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## North Star (19 Feb 2009)

Newtogame: With 27 years in a defined benefit scheme, assuming the company remains solvent you are in a reasonably good position re your pension. However you are very right in that if you can afford it, topping up your pension via AVCs is tax efficient and very sensible. A couple of questions if i may, how are you contributing AVCs? is it under the employers scheme, seperate AVC pension scheme or an AVC PRSA?
Can you clarify what you mean by 3.5% charge? Thanks


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