# Buy additional years



## kitty81 (23 Nov 2018)

Looking for advice on my DB pension please.

We have received details in work recently that we have the option to 'buy additional year's' at a neutral cost before this option is removed from next year.

I have asked for the cost of this and am awaiting a reply but I really have no idea what it means and how it would be paid (a lump sum or a higher pension deduction?)

Unfortunately our 'pension experts' in work are not very helpful altho we asked for it to be explained and the implication of it for us.

Could anyone enlighten me please? Is it worth considering further?


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## Leper (24 Nov 2018)

Buying notional years means that you are buying service that you will not have to work. You will qualify for an increased payment as a result. If you are working in the Public/Civil Service it is incumbent on Human Resources Section to inform you of costs in writing and in advance of whatever deadline. Purchasing service is not cheap and you will have to pay compound interest on amounts due. There is a ceiling on the amount of time you wish to buy. I don't have exact details of calculations as I left much paperwork histories behind me when I retired earlier this year. 

My advice (for what it is worth):- Don't let the opportunity slip; it could cost you and your spouse. And you should be dogged of your enquiries for as long as it takes. If necessary use your union asap. No harm in having an independent paper trail.


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## Early Riser (24 Nov 2018)

kitty81 said:


> We have received details in work recently that we have the option to 'buy additional year's' at a neutral cost* before this option is removed from next year*.



Are you in the Public Service? Are you getting the option to purchase service at a more favourable rate than the general notional purchase scheme ? If not, why is the notional years purchase option being removed next year ? If you are getting a more favourable rate now for some reason, it would seem very attractive.

More generally, notional service purchase is not cheap but you get full tax relief which makes it attractive, particularly if you are paying at the top rate. However, it is only of relevance if you are going to be short years for full pension at retirement.

An alternative approach to improving your pension entitlements is AVCs. You can read more about both Notional Years and AVCS here :

[broken link removed]


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## Feemar5 (24 Nov 2018)

I would suggest that you need to be careful as DB schemes seems to be in a lot of difficulty and most companies now only offer DC schemes.    I was a member of a DB scheme which got into financial difficulty in the recession and members were asked to pay extra into it.     We did this but the scheme was eventually wound up and funds transferred to DC scheme  -  people who retired during that period did not get what they expected.    AVC's are a good way of topping up your pension as you also get tax relief.     DB schemes used to be the "Rolls Royce" of pensions but became too expensive for companies so most employers now only offer DC schemes.   If you are in the Public Service I understand they have a completely different system.


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## kitty81 (24 Nov 2018)

Thank you for replies & advice. 

The memo we received advised that the decision was made by the trustees due to cost and risks to the company. 

Maybe it's my suspicions, or maybe it has no bearing, but all the top dogs are coming up to retirement age themselves so wondering if it's to their advantage that this is happening now? I don't know enough about pensions to understamd if this is the case so maybe I'm unfairly assuming the worst! 

Any new entrants to the company have a DC scheme for the last 8/10 years or so. 

As I work as a job sharer I originally felt it might be worthwhile buying some years but I am in the lower tax band so wonder would it be out of reach money wise? Is it collected in a lump sum or an increase in deds each month? Would AVC make more sense as I could choose the amount I can afford?? 

I will get back onto the 'expert' on Monday to follow up and see if they have a costing done for me yet.


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## kitty81 (24 Nov 2018)

Early Riser, neutral cost is mentioned and goes on to explain.....'factors will be calculated by reference to current market rates and there will be an increase in the purchase cost' ?

Does that mean that before this memo was issued, the cost of the additional years was less than after the memo was issued? As in, it changed overnight? 

Seems unfair if so?


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## Early Riser (24 Nov 2018)

Kittty81 - It sounds like you are in a private sector DB scheme. In my post I was referring to the public sector, which operates differently. Sorry.

Others, such as Feemar5, will be better able to advise you.


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## Feemar5 (25 Nov 2018)

I don't understand how the scheme is offering you the chance  to buy extra years if the management are concerned about "costs and risks to the company"    Do you get an annual statement showing projected benefits - it should state:
1.Name, d.o,b marital status  etc.,
2.Service with Company
3.Projected pension at normal retirement age or Reduced pension plus tax free lump sum
4.Benefits payable in the event of your death in service

Regarding AVC's you can either pay weekly or a lump sum.    Revenue have limits on how much you can pay into a scheme and claim tax  relief on - depending on your age.    There is a scale going from 15% of your salary at age 30 to 40% at age 60.   You can also AVC's from another provider separate to your company plan  but there would be set up charges.

I would suggest that you need a lot more information before deciding to pay extra money in - how long do you have to go to retirement would be another consideration.     From my experience a "pot" of around 170K would only get you a pension of 7.5K or a lump lump of around 42K plus a reduced pension of 5.5K - these figures are estimates and are based on service of 40 years.  Have a chat with others in the company and you can also contact the administrators of the scheme for advice but I would have concerns regarding getting extra benefits if the management are worried about costs and risks.


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## kitty81 (29 Nov 2018)

Thank you EarlyRiser & Feemar5.

Yes, we get annual statements about our pension but it's like Chinese to me!

From what I've been told from colleagues I believe its not a great pension to look forward to.....but they have also admitted they are not really intune with it either.

I have 23 full years (I jobshare so it would give me 11.5 pension years) left to retirement at age 60.

I have asked HR again for costings and they apologised it is taking so long....apparantly there are lots of people waiting.

I appreciate it makes no sense to allow the option for a time (in this case, 5 months) if there are concerns over the cost & risks to the company.

Would the trustees to the pension always be employees of the company? The memo came from the HR Director so wondered if it was an internal decision or if trustees include external experts? I wouldnt trust the internal people as far as I could throw them.

Also if I bought additional years now and left the scheme before retirement would it have any implications.

Thank you again for all the info so far


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## Feemar5 (30 Nov 2018)

i would suggest you contact whoever is administering the scheme - it is usually a life assurance company or pension specialists and they should  be able to advise you about early retirement etc.,  According to the Pensions authority A *trustee* is a person or company, acting separately from the employer, who holds assets in the trust for the beneficiaries of the *scheme*. *Trustees* are responsible for ensuring that the *pension scheme* is run properly and that members' benefits are secure.


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## LDFerguson (1 Dec 2018)

Feemar5 said:


> i would suggest you contact whoever is administering the scheme - it is usually a life assurance company or pension specialists and they should  be able to advise you about early retirement etc.,  According to the Pensions authority A *trustee* is a person or company, acting separately from the employer, who holds assets in the trust for the beneficiaries of the *scheme*. *Trustees* are responsible for ensuring that the *pension scheme* is run properly and that members' benefits are secure.



Just a small clarification.  The administrator of a pension scheme and the trustee of a pension scheme are two distinct roles, although they can be carried out by the same individuals or companies.  The trustee has the job of making sure that the pension scheme is run properly for the benefit of the members.  The administrator is the one that does the paperwork, collects contributions, issues statements etc.  It's the trustee's job to make sure that the administrator is doing their job properly.  If not, the trustee has the power to fire and replace the administrator.  

Regards, 

Liam
www.ferga.com


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## kitty81 (1 Dec 2018)

Thank you Feemar5 and Liam


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## Feemar5 (2 Dec 2018)

There is a very good article in today's Sunday Independent written by Alan Casey pension specialist with Bank of Ireland regarding benefits of DB V DC schemes.   It doesn't answer your specific question but is interesting.


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## kitty81 (6 Dec 2018)

I will try get my hands on this as I'm keen to understand it all. 

BTW. ...I'm still awaiting a reply from HR with charges!


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## kitty81 (14 Dec 2018)

Still waiting on a response re the charges.....

Surely it's not rocket science to calculate or am I being dubious in the motives behind it?


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## kitty81 (10 Jan 2019)

And I'm still waiting on figures! I have emailed numerous times in the meantime & haven't even received an acknowledgment.

I'm becoming very dubious over the obvious lack of information about this, which makes me suspect, it is would be in my favour to do it. Some colleagues are in the same boat with no replies received. 

The company have sent nothing at all other than the initial memo & the deadline is approaching. 

If I go to an independent pension advisor, can they request the info on my behalf or is it up to me to bring that info to them?


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## Feemar5 (11 Jan 2019)

I don’t think they will give your information to a third party- it would be usual for you to go to an independent advisor with your figures, not asking them to get the figures for you.  Can you speak to somebody in HR and explain to them that you need time to review what they are offering and you need the figures now or else a different deadline.    Is there many people awaiting replies - could you all get together and request a meeting with HR.    It seems a bit of a mess but you are entitled to a response from HR.    As s matter of interest do you work in a large company? - they seem to be a bit disorganized and I would be concerned about the future of the  DB scheme.


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## cremeegg (11 Jan 2019)

A DB pension can be very valuable, so long as the funds are available to make good on the benefits promised. You should be able to get some insight into this by looking at the annual statement, or getting someone to look at that for you.

The benefit you are entitled to at retirement should be clear, based on x years of service you will get y% of your salary as pension. Thats why its called defined benefit.

As regards the costs, these are basically decided upon rather than calculated. The trustees will have to take actuarial advice and balance the interests of the various members, those with longer and shorter times to retirement and those already retired.

The HR department really has no involvement other than as messenger. The Trustees have all the responsibility.


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