# Have to buy annuity after occupational scheme?



## Aifrica (15 Jun 2003)

Hi,
I have a personal pension scheme which I've frozen payments into for the last year. I've now joined a company with a defined contribution occupational scheme with immediate vesting rights for their contributions. I've a couple of questions:

1. A poster in a previous thread (below) seemed to indicate that contributing to the main scheme in an occupational scheme forces you to buy an annuity when you retire. Is this always the case? I don't want to commit to anything where I can't avail of ARF options later. Could my whole payment be treated as an AVC or do I have to make 'regular' contributions for the company to match? (I'm a regular PAYE employee)


"If your next employer has a company scheme in place and you wish to contribute, you should make your contributions an Additional Voluntary Contribution (AVC) because on retirement AVC money can avail of the more flexible Approved Retirement Fund (ARF) options. Whereas if you contribute to the main scheme you are 'Annuity Trapped'. ie forced to buying a life time pension with your pension fund thereby surrendering your capital to a life company which will die with you."


2. If I join the company scheme but don't contribute the full 20% of net relevant salary (I'm > 30) am I allowed to contribute a lump sum to my personal pension to make up the balance at the end of the year?

Any advice appreciated!


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## Westbound (16 Jun 2003)

*Pension Options*

Most scheme rules dictate that an 'ordinary' employee contribution will be matched by the Employer contribution i.e. you won't get one without the other. Anything above that will be treated as an AVC, which can be used to buy an ARF. Most employer schemes are designed for groups and as such won't alter the rules for an individual, e.g. to allow all Employee as an AVC.

As for paying into the Personal Pension Plan, if all your income is PAYE and you have no other earnings, then you cannot contribute to the Personal Pension Plan. However as far as I understand it, you should be able to establish a PRSA if you want to maximise your AVCs - but bear in the mind the cost of this vs maximising your AVCs in the Employer Plan.


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