# Pension product or investments?



## skintagain (18 Sep 2017)

I am now 58 and unemployed after 30 years working. I'm about to get a small pension pot (AVC payment plus transfer value) of 300k total as a DB pension scheme I was a member of, before being made redundant, is now wound up. I've no mortgage, receive a small Jobseeker's Allowance and my wife has a struggling business of her own and is just about breaking even. Luckily we are debt free, have an emergency fund of 9k and enjoy a simple healthy life but I am worried about how to provide for our future. Friends say I should cautiously invest because I will get no tax benefits as I'm not getting a wage. I'm inclined to invest in a pension product and lock it away till I'm 65. I will seek professional advice - even tho it's a big struggle to fork out 1 to 2k - but would appreciate forum members' views on what to do with the 300k?


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## North Star (19 Sep 2017)

Hi skintagain, Can you ask the pension scheme administrators if you are permitted to transfer your pension benefits into a Buy Out Bond ( a pension product in your own name) as you were made redundant and the DB scheme is now wound up. If you can do this then at least you have the option of taking the pension benefits from the Buy Out Bond now or later if you need them short term , or if possible you can leave the funds invested in the Buy Out Bond to grow tax free over time till you need them at a later stage. This might be your best option to keep the pension assets growing till you are 65, but at least they are accessible if you really need them beforehand. 
Also please ask what the annual charges are on the current pension arrangements and compare/contrast versus the Buy Out Bond when you are looking at that. If you do your homework, no doubt helped by other posters here, you might be able to plan your route forward without much or any additional expense.

I hope that helps. All the best Vincent


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## skintagain (20 Sep 2017)

Thanks for the reply Vincent. Yes I can avail of a buy out bond. I currently don't know about charges yet. I am inclined to lock it away as I have not given up hope about getting a job even tho so far it doesn't look good at 58 with limited skills. Over the past number of weeks I have read a fair bit and it seems a good idea to 'invest' long term rather than speculate but it's all very confusing. Thanks again.


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## skintagain (21 Sep 2017)

Re the Buy out bond the insurance firm (default option) is going to charge 0.55% but must stay with them for two years. 

Also do I have to take a tax free lump sum? 

If I do the chances are my small social welfare (dole) will cease but more importantly I'll reduce my pension amount when I officially reach retirement at 65. I don't really want to do this and hope I won't remain on the dole much longer by getting a job.


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## Steven Barrett (22 Sep 2017)

The contract is pretty reasonable...unless you need to access your fund within 2 years. 

You don't have to take a tax free lump sum, but the alternative is paying tax on the money you take out, so why wouldn't you avail of it? You don't have to take it until you retire, you don't have to take it now. 

Best of luck with the job hunting. 

Steven
www.bluewaterfp.ie


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## Steven Barrett (22 Sep 2017)

...speculating is akin to betting. You are taking the chance of making a big gain or you can lose it all. Pension funds do not speculate, they are dealing with people's retirement funds and they will invest. The value of the assets they hold may go up and down but the companies they invest in are usually still in operation. The pension investments that I have seen get in trouble are the ones with borrowings, the asset (always property) falls in value, they struggle to repay the debt and sell it off at a loss. They aren't really around anymore and it's not that difficult to avoid them. 


Steven
www.bluewaterfp.ie


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## skintagain (22 Sep 2017)

SBarrett said:


> the money you take out, so why wouldn't you avail of it? You don't have to take it until you retire, you don't have to take it now.


Thanks SBarrett for clearing that up. So I could put the total transfer amount into the default option and take the lump sum in 7 years (I'll be 65)?

If I do this, can I draw down my pension at any time or will it be locked away til 65?

The minute I choose, for example the default option, should I just 'forget' about it while, hopefully, it makes a little more, or will I have to 'take' an income from it each year? Is this a wise option?

Also should I pay for financial advice - after all I have no loans or investments, a tiny amount of savings/emergency fund and my only concern is what to do with this transfer amount? I haven't a lot to deal with.


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## North Star (22 Sep 2017)

Hi skintagain, 
Your are in a difficult position here. You are trying to leave the pension and tax free amount  untouched so it can grow over time i.e. you will have more down the road. But here is the difficult bit, can you afford to run a level of investment risk which might expose the pension fund to a material loss? I suspect the answer is 'probably not'. Therefore dont just take the default investment option. You need to look at the range of investment options carefully and try to select options that probably wont be exposed to material falls. This will be less of a concern when you are back working again. I dont want to worry you, but this is an important amount of money for you. Get as much info as you can on the investment options and perhaps post your queries here as a starting point.

All the best Vincent


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## Steven Barrett (22 Sep 2017)

There will be early exit penalties on your pension for the first 2 years, so if you want to mature the policy in that period, a percentage will be deducted from your policy. This is because the adviser if being paid by the insurance company and the life company want to protect themselves against you just moving the policy immediately and them not recouping any of the payout through fees. Other than that, you can mature the pension whenever you want. Nothing it locked in. The retirement age of 65 is the "normal retirement age". All pensions must have one. It doesn't mean you can't mature the pension before or after that. 

I wholly agree with Vincent on the investment strategy advice. Is the advisor who is setting up the Buy Out Bond for you not giving you any investment advice? They are getting paid to, so they should be doing a lot more than merely sending you a form.


Steven
www.bluewaterfp.ie


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## skintagain (25 Sep 2017)

North Star said:


> Hi skintagain,
> Your are in a difficult position here. You are trying to leave the pension and tax free amount  untouched so it can grow over time i.e. you will have more down the road. But here is the difficult bit, can you afford to run a level of investment risk which might expose the pension fund to a material loss? I suspect the answer is 'probably not'. Therefore dont just take the default investment option. You need to look at the range of investment options carefully and try to select options that probably wont be exposed to material falls. This will be less of a concern when you are back working again. I dont want to worry you, but this is an important amount of money for you. Get as much info as you can on the investment options and perhaps post your queries here as a starting point.
> 
> Thanks Vincent. I'm really only aware of typical pension investment options such as annuity (hardly an investment in that you get a guaranteed amount til you die); an ARF and the buy out bond where I would specify a type of fund to invest in. Are there others where pension amounts would be placed? You are correct regards my risk exposure - although I do realise a little 'acceptable' risk may be necessary to generate a better amount.
> ...


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## Steven Barrett (26 Sep 2017)

If you don't feel happy with the lack of advice you are getting you are perfectly entitled to get outside advice. You are being charged for setting up this product, so you should get advice and a lot more than a blank form in the post with no investment advice. 


Steven 
www.bluewaterfp.ie


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## skintagain (3 Oct 2017)

Thanks SBarrett. Thanks NorthStar. As I said earlier I do intend to get advice but want to seek as much info as possible beforehand, so really appreciate your advice. This is a very steep learning curve! 
Re my situation (in a nutshell - unemployed, 58, deferred member of now wound up company DB scheme with pension pot of 300k), I thought there were really only 4 options for somebody in my position:

1, leave the money (pension fund plus AVCs) go to the default option set up by the trustees;
2, buy an annuity - which I don't want to do now;
3, take out an ARF;
4, pay the tax and cash it in.

Do I have more options?


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## skintagain (17 Nov 2017)

I agree I need to seek advice. However, as you can see from my opening post I really have very little money and did not want to meet with some advisor without getting as much info as I can. 

I'm still exploring employment options and money is too tight to mention! With that in mind I'm wondering how much an indendent financial adviser would charge to sort out my pension transfer amount? Nearest to Cork would be good. 

A bit like diving in to a cold pond: rather than just diving in, I want to know in advance so I can prepare for the shock. I'm a little over my head and, for me, in dangerous uncharted water!


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