# Leaving scheme within 2 years



## ackd (25 Sep 2008)

I'm eligible to join my company's DC pension scheme and they will match my contributions up to 4%.  What I'm wondering is if I leave the scheme within 2 years can I keep the company's contributions or will I lose them?


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## ClubMan (25 Sep 2008)

The statutory vesting period for employer contributions is 2 years. Unless your employer's scheme has a shorter vesting period then I think that you will lose them. If you transferred in any funds from another occupational fund then you will also have transferred in vesting time. Note that if you are a member for less than 2 years and take a refund of contributions taxed at standard rate income tax then the refund only applies to your own contributions.


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## ackd (25 Sep 2008)

Thanks for that clubman.  If that's the case I think I'll just take the cash and invest it somewhere else.

M.


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## daraghom1 (26 Sep 2008)

One point is that if you know you won't be in the scheme for 2 years you could use it as a savings vehicle assuming you pay tax at 41%.

For example, you put in €100 each month, which only costs you €53 from your next pay. When you leave you only pay 20% tax on your contributions (the €100 figure) so you can save up to 27% of the amount you invest....this all assumes the stockmarket returns do not effect you. You could opt for a Cash Fund which your scheme is likely to have.


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## LDFerguson (26 Sep 2008)

Another relevant point is that your employer might not take back employer contributions if you leave within two years.  While legislation says that they can, they don't have to.  You should check with the employer.


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## TheFatMan (9 Oct 2008)

Why is it limited to 20% for cashing out? Would expect someone at the 41% rate to be charged 41% on exiting.


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## LDFerguson (9 Oct 2008)

Tax on refund of pensions is a flat rate tax; it's not income tax.


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## TheFatMan (1 Mar 2009)

Where an employee chooses to leave an approved pension scheme and, with Revenue approval, has his/her contributions returned to him/her, the standard rate of income tax must be withheld by the employer / administrator of the scheme and remitted to Revenue. The standard rate of income tax is still 20%.


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## LDFerguson (2 Mar 2009)

TheFatMan said:


> Where an employee chooses to leave an approved pension scheme and, with Revenue approval, has his/her contributions returned to him/her, the standard rate of income tax must be withheld by the employer / administrator of the scheme and remitted to Revenue. The standard rate of income tax is still 20%.


 
I stand corrected.  My understanding of how refunds are taxed was correct but my understanding of the name of this tax wasn't.  I bow to your superior knowledge on this.  

Which begs the question - if you already knew, or had access to the answer to the question, why did you ask it?


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## TheFatMan (2 Mar 2009)

Sorry only got that from PWC this week.


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