# Best option when transferring from Defined Contribution to Defined Benefit Pension?



## The Valley (22 Nov 2007)

Hi all,

Hopefully you can help me...

I have a defined benefit pension with my current employer (been with them since 2005).
I had a Defined Contribution pension with my previous employer for nearly 6 years( I also transferred about 4 years pension from my first employer into this defined contribution scheme). My previous employer no longer operates in Ireland and is going to discontinue the pension scheme.

I now have to decide where to transfer my old pension sum to. It seems to me that it would be no advantage to transfer the money to my current pension as it is defined benefit. Is that correct?

Is PRSA the way to go? Are there any other worthwhile options? I would really appreciate any advice.


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## MMilken (23 Nov 2007)

The Valley said:


> I now have to decide where to transfer my old pension sum to. It seems to me that it would be no advantage to transfer the money to my current pension as it is defined benefit. Is that correct?
> 
> Is PRSA the way to go? Are there any other worthwhile options? I would really appreciate any advice.


 
That is not correct - if you transfer from DC to DB you will benefit - the only uncertainty is whether the Trustees of your DB Plan will allow you "added years" in respect of your transfer in or whether it would simply be invested by them for you on a DC basis.

I hope that makes sense.

Your two other other options would be to transfer to a PRSA (as you said) or to a Personal Retirement Bond which is an insurance policy specifically designed to accommodate transfers from occupational pension plans.

Hope this helps.


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## Alan Moore (6 Dec 2007)

*Re: Best option when transferring from Defined Contribution to Defined Benefit Pensio*



MMilken said:


> or whether it would simply be invested by them for you on a DC basis.



In funds that may or may not suit you.


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## MMilken (6 Dec 2007)

Usually the member would make their own fund choice.


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## Alan Moore (6 Dec 2007)

Nor trying to be confrontational here. All I'm saying is that transferring to DB from DC may not be the best option. Generally speaking the funds available on transfer to a DB scheme can be quite limited and may not match the persons objectives/risk profile. The DC holder does have the option to transfer to any fund available on the market and this may be a superior alternative depending on his/her circumstances.


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## MMilken (6 Dec 2007)

Yes of course there would be more funds, but there MAY be a wide range of funds available under the DB Plan's arrangement to accommodate transfers-in...we really do not know without further info.

One would expect that setting up a new policy to accommodate any transfer from DC would be more expensive than transferring into the existing DB Plan.


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## Alan Moore (6 Dec 2007)

MMilken said:


> Yes of course there would be more funds, but there MAY be a wide range of funds available under the DB Plan's arrangement to accommodate transfers-in...we really do not know without further info..


 
Agreed, there may



MMilken said:


> One would expect that setting up a new policy to accommodate any transfer from DC would be more expensive than transferring into the existing DB Plan ..



My own experience is that it is much of a muchness when it comes to costs ( i.e. that most trustees will ensure that the allocation will be at least 100% on transfer to PRBs etc but appreciate that may not be the case across the board.

Personally, I have a number of pensions and am now back in a DB scheme (lucky me) but have transferred my previous assets to PRB's and funds that best suit my profile and are superior in my view to those available under my new arrangement.

Again, all I'm saying is that it's horses for courses and there is no yes or no answer to the posters original question without delving deeper into the posters position.


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## MMilken (6 Dec 2007)

Do you mean 100% net allocation after a bid-offer spread on a PRB?

The main difference would usually be on the fund management charge, a DB Plan because of its size would usually have sub 0.75% annual fund management charges, it can be difficult for a retail investor to get this type of fund manageement charge.


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## Alan Moore (6 Dec 2007)

MMilken said:


> Do you mean 100% net allocation after a bid-offer spread on a PRB?


Yep


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## MMilken (6 Dec 2007)

That could be after a bit of commission so because the life companies would often give > 100% for a decent size PRB!

It's the fmc that will catch you in the long-run though.


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## Alan Moore (6 Dec 2007)

MMilken said:


> It's the fmc that will catch you in the long-run though.



Maybe, if you haven't received an enhanced allocation.
Maybe, if the funds you may want are similar to those available with the DB arrangement.
Maybe, if you don't want access to sophisticated/specialised funds (e.g. gearing/syndication) with greater potential upside and obviously downside.

My point from the outset is there are a lot of assumptions and the right advice might be to transfer to DB for person x but not for person y.


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## MMilken (6 Dec 2007)

That was my point - the idea of transfer to DB should not be dismissed nor should it be accepted without looking at the terms under which it would be invested and a comparison with (as I said at outset) transfer to PRB/PRSA.


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