# Leaving Options



## Dave (25 Jul 2003)

I'm changing jobs so I will shortly receive my pension options from Mercer. If I initially choose to leave my company pension where it is, can I move it to another company pension/buy out bond at a later date?

I believe that I will not be able to transfer it to a PRSA, is this true?
If so what is the reasoning for this?

Thanks

David


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## ClubMan (25 Jul 2003)

*If I initially choose to leave my company pension where it is, can I move it to another company pension/buy out bond at a later date?*

In general, yes. See  for some related info.

*I believe that I will not be able to transfer it to a PRSA, is this true?*

Not sure if this is only possible for occupational pension AVCs of generally. According to the [broken link removed]:

_*Interface [of PRSAs] with Occupational Pension Schemes*

19. Transfers from an occupational pension scheme or a statutory scheme to a PRSA will be allowed where the member has been in the scheme for 15 years or less and either
<!--EZCODE LIST START--><ul><li>the scheme is being wound up, or</li><li>the member is changing employment.</li></ul><!--EZCODE LIST END-->
The value of AVC contributions to an occupational pension scheme may be transferred to a PRSA without regard to the foregoing restrictions._

Maybe somebody else with more expertise in this area can comment?


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## Conan (25 Jul 2003)

*Pension Transfer*

One can only transfer benefits from an occupational pension scheme to a PRSA if they have less than 15 years service in the occupational scheme.
However, before the transfer can proceed you must be provided with a Certificate of Comparison, which compares the benefits in the occupational scheme with those which the transfer value might buy in the PRSA. As things stand today, the pensions industry is still awaiting clarity around how these Certificates are calculated etc. So in reality it is not possible yet.
If you are moving from a Defined Contribution occupational scheme the comparison is fairly straightforward. However if you are moving from a Defined Benefit scheme it is a more complicated comparison.
However, I would assume that you could leave your benefits where they are in the short term and seek a Comparison from Mercer at a later stage when the basis for preparing the Certificate is clarified.


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## rheinie (26 Jul 2003)

*pension transfer*

If a person is made redundant can u transfer benefits from DB scheme to a prsa if u have more than 15 years service ,or what are the options in this situation


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## Conan (28 Jul 2003)

*Pension Transfer*

Under the Pensions Act (as amended recently) if you have more than 15 years service in an occupational pension scheme you cannot transfer the value to a PRSA.
In such a case you would have to either:
* Take a deferred benefit based on your accrued entitlement in the Defined Benefit scheme
*Take a transfer value to any new occupational pension scheme (not PRSA)
* Take a transfer value into a Buy Out Bond (an individual pension bond policy)

The 15 year rule in relation to PRSAs is designed to discourage people from transferring Defined Benefit entitlements in particular. It is intended (under the Pensions Act) that Buy Out Bonds would be abolished, but as yet that part of the legislation has not been enacted.
Hope this helps.


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## rheinie (29 Jul 2003)

*Pension transfer*

Thanks for reply but could you say which of three options would be the best in this situation


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## Conan (29 Jul 2003)

*Pension Transfer*

Impossible to say which is the "best" option. It depends on the situation:
*Are you taking up new employment?
*Are you joining a new pension scheme?
*What is the transfer value in lieu of the deferred benefit?

The paid-up route is the safe option. You at least can estimate what you will get when you come to draw the benefits. So if your future pension arrangements are uncertain perhaps the paid-up route is the way to go. On the other hand if you are happy to take a degree of risk you could opt for a transfer to a buy-out bond.

I would suggest that you talk to Mercer about the options and determine what you are comfortable with.


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## rheinie (30 Jul 2003)

*Pension transfer*

Thanks for reply
Are u taking up new employment? not immediatly
Are u joining new scheme ? no
What is transfer value in lieu of the deferred benifit? Could u explain or expand a bit on this issue as I not sur that I have a full understanding of how this opperates.
Also when u say paid -up route is safest option ,could u expand on this a bit as I just want to be able to get my head around this when it comes to decision time .Thanks again


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## Conan (30 Jul 2003)

*Transfer Benefits*

If you take the paid-up route from a Defined Benefit plan you will be promised a specific benefit (related to your years of service and current salary) at normal retirement age. This deferred pension (paid-up pension) will be indexed up to retirement at the lower of 4% p.a. or CPI in order to maintain the real value.
This is the safe option as you have reasonable certainty as to what you will get on reaching retirement age. Mercer should be able to tell you what that pension is in today's terms and you can indexed it forward to retirement (at say 3% p.a.) to give you the estimated pension at say 60 or 65.

As an alternative to this route, the Trustees will also offer a transfer value (a cash amount) which you could invest in either a Buy Out Bond of another pension plan. This is a riskier option since it is more difficult to estimate what this might grow to at 60 or 65 and then to estimate what pension this fund would buy at that stage. If the Transfer Value was invested well, it could do better than the deferred pension or it could do worse.

It it impossible to say which is the best route. The deferred pension route is the safest less risky option as you can reasonably estimate what your pension will be at say 60 or 65 (because you will know exactly what it is in today's terms). The Transfer Value route offers the potential to get a better return by investing a cash sum in lieu of the deferred pension, but equally it could do worse depending on how the transfer value is invested.

So on balance it is probably a decision which is based on your attitude to risk, the deferred pension being the safe bet, the transfer value being the gamble.

But get Mercer to explain all the options. That's what they are paid to do.


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## rheinie (30 Jul 2003)

*Transfer benifits*

Thanks Conan I think that explaines things clearly ,will need to get more information.


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