# Convert retirement pension to Annuity



## roker (31 Aug 2008)

Just when I though I had my pension arrangement organised. My pension provider has contacted me and suggested that that they convert to anannuity instead of paying from the pension funds. they say they can enhance my pension by combining with another small pension that I have already agreed to accept a trivia sum.
I have rececied my lump sum payment and should have received my first retirement payment from last week.

Can anyone please explain what this means? will I still receive my pension because I have now retired.


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## ClubMan (31 Aug 2008)

I presume you know what an annuity policy is in this context? Basically a policy which you buy with some or all of your maturing pension lump sum and which pays an income for life. Normally you can take a 25% lump sum tax free and then buy an annuity with the remainder or else, in some cases, roll it over into an _A[M]RF _investment if you don't want to draw on it immediately. You should get independent professional advice and not act solely on what your pension provider says.


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## roker (31 Aug 2008)

I have received my 25% lump sum, I am under the impression that my pension the other 75% is paid for life, because as small proportion is index link to inflation, Why should I take an anuity when they have already offered me a pension amount per month?


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## ClubMan (1 Sep 2008)

roker said:


> I am under the impression that my pension the other 75% is paid for life, because as small proportion is index link to inflation, Why should I take an anuity when they have already offered me a pension amount per month?


Normally you can use some or all of the 75% to buy an annuity. Are you sure that this money already guarantees you an income for life and that you don't need to buy an annuity first?


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## Don_08 (1 Sep 2008)

Roker - was this a DB arrangement?  Sometimes the trustees prefer to buy out member's pensions ( would be the same amount you would get as if it was paid from the fund).  This is more a technical issue on how they run their fund.

If it is DB, post here and can give more advice on things to take account of.


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## roker (1 Sep 2008)

What is a DB? The pension was a company scheme that myself and the employer paid into.
wording is funny.
("I receive €21,253 tax free lump sum and reduced pension of €5,238 per annum escalating by 5% or the rise in the consumer index. In addition, a spouses pension of 50% on my death. pension paid monthly gauranteed for 5 years")
I assume this is a lifetime pension for myself and 5 years for my wife?
The company seem to be pushing the Anuity. Is there an advantage for me? Am I at risk to the markets? should I just stick to the original pension?
I am completely in the dark on these matters. Please advise.


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## ClubMan (2 Sep 2008)

_DB = Defined Benefit.
DC = Defined Contribution.
_www.pensionsboard.ie may cover these terms.

I suspect that the wording above refers to the hypothetical situation in which you take a 25% tax free lump sum and then buy an annuity with the rest. I think it's just an illustration of the sort of pension that you might receive from your accumulated pension savings. I also suspect that you do not get any pension until you do something such as buying an annuity with the remaining 75% lump sum. You seem to assume that you will get something automatically. If you need to buy an annuity then you can shop around for the best deal and are not tied to your existing pension provider as far as I know. Normally when your pension matures the options are to take a 25% lump sum and then either buy an annuity with the rest or roll it over into a further investment  (_Approved Retirement Fund _or _Approved Minimum Retirement Fund_ - _ARF/AMRF_) until you want to draw down the benefits.

I still believe that you should get independent professional advice especially if you don't know what sort of pension you have or what is going on here.


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## LDFerguson (2 Sep 2008)

I suspect Clubman has hit the nail on the head above. It sound like when the pension provider "suggested that that they convert to anannuity instead of paying from the pension funds. they say they can enhance my pension by combining with another small pension that I have already agreed to accept a trivia sum", they didn't mention to you the option of buying your annuity (guaranteed lifetime pension) from another provider.  This is well worth shopping around for.


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## roker (2 Sep 2008)

Thanks all. So I can say that this is normal and that there is no catch in changing to an anuity. They say that there is no change in conditions from the existing pension conditions, but  I could do better by shopping around which I shall do.


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## ClubMan (2 Sep 2008)

As far as I know it's normal for somebody to retiring to be able to take up to 25% tax free and then buy an annuity with the remainder. You should shop around for the best deal on an annuity if you choose to go that route. You should get independent professional advice.


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## boaber (2 Sep 2008)

roker said:


> ("I receive €21,253 tax free lump sum and reduced pension of €5,238 per annum escalating by 5% or the rise in the consumer index. In addition, a spouses pension of 50% on my death. pension paid monthly gauranteed for 5 years")
> I assume this is a lifetime pension for myself and 5 years for my wife?



An annuity offers you a guaranteed income for the rest of your life

The Guaranteed period of 5 years quoted guarantees to you a minimum period of payment. This means that, if you die before the 5 year period is up, the provider will continue to pay an income, for example, to your spouse or dependants. Should you not die during this 5 year period they will continue to pay you your income for the rest of your life.

The 50% spouse's pension means that in the event of your death if your spouse is still alive the provider will continue to pay an income to your spouse for the remainder of his/her lifetime.

Did they say if there was *with overlap *or *without overlap*?

With overlap means that in the event of your death the provider will immediately begin paying the income to your spouse.  Without overlap means that they will only pay the income to your spouse on the later of your death or the end of the guaranteed payment period.


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## ClubMan (3 Sep 2008)

Perhaps [broken link removed] from this page might be of use to the original poster?


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## roker (4 Sep 2008)

What happens if I simply refuse to convert to the anuity, and stick to the oroginal pension plan? this is also for life, and has the same conditions.


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## ClubMan (4 Sep 2008)

Are you sure that you get paid anything if you do this? If you do then presumably there is some sort of automatic annuity purchase effected in this case?


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## roker (6 Sep 2008)

I have the conditions of payment from the pension provider already, also in the hand book that my employer provided. 
Why did they wait until it was overdue before issuing this statement?
Their statment says "They have agreed to set up an Anuity rather than paying the pension from the pension fund" 
I thought it was normal for a pension fund to pay a pension and an anuity was an option.


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## roker (11 Sep 2008)

Sorry for going on, but still trying to get to the bottom of this. The pension provider has now told me after three weeks that I have no choice but to take an anuity because I paid into a "Defined Benefit Scheme" If I had paid into a "Define Contributory Pension Scheme" I could shop around.


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## Don_08 (11 Sep 2008)

Ok so it is a Defined Benefit Scheme. 

Number one thing to do is find out what the Minimum Funding Standard Funding Level of the scheme currently is ( or most recent calculated) - your pension provider can tell you this.  

Also - what pension increases are promised on your pension - check your statement / booklet. What pension increases are they offering on the annuity purchase.

Also what history is there of discretionary pension increases being granted - again your pension provider should tell you this.  

As I said - in a defined benefit scheme this is really an investment decision by the trustees - they are just passing risk onto the insurance company - it should not make any difference to the pension you get paid.  However, check out the points above and let us know the answers.


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## ClubMan (12 Sep 2008)

roker said:


> Sorry for going on, but still trying to get to the bottom of this. The pension provider has now told me after three weeks that I have no choice but to take an anuity because I paid into a "Defined Benefit Scheme" If I had paid into a "Define Contributory Pension Scheme" I could shop around.


Once again I would urge you to get some independent, professional advice.


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## roker (14 Sep 2008)

Thanks Don 08 & Clubman.
I have been getting professional advice but they did not spot the Defined Contributory Pension Scheme and as yet have not sugested anything better.
The condition of the anuity is the same as the pension originally quoted, with same conditions so I have nothing to lose. The pension provider also said that I have no choice, I cannot shop around with this scheme. It's a pity they did not tell me all these things weeks ago and save me all the hassle.


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