Deferred Member of Defined Benefit

[Bilzer40]

I have recently got corresponence from a previous employer for a scheme offering to transfer the benefits of my existing pension arrangements to a bond or PRSA or alternatively the default option to defer the pension benefets until I am 65.

My prefered option is to defer the benefits as I know the exact income, however I am concerned that something could happen between now and 30 years time which could wipe out the pension. At least with the bond or PRSA arrangement it would be worth something.

Can anyone advise of the risks of deferring the benefits?

 

[Starbuck]

Why not transfer to another scheme? If the Trustees are cooperating you could do that instead. Ask for a Transfer Value. You are legally entitled to one every year.

 

[Bilzer40]

Thank You Star Buck.

Yes this is exactly what the trustees are offering and they have given a value. I have no doubt all of this is in godd faith as the company just want to rationalise the scheme. However I am reluctant to transfer what is a defined benefit to a bond or PRSA where I dont know what the value will be in 30 years but on the other hand I would hand I am wondering is there a possibility I could lose the entire fund if I leave it where is is?

 

[Starbuck]

Bilzer, let me preface by saying I'm no expert - I'm here looking for Pension advice on another thread. However I have spent a fair bit of time researching Pensions Transfers.

The PRSA/Bond solution being offered you is not really what I mean by a Transfer. What I'm referring to is transferring into another functional Pension Scheme, preferably with your new employer. If they don't have one then your options are more limited to the PRSA/Bond route. Unless you happen to be moving abroad, in which case you could investigate the UK QROPS/QNUPS solutions.

You are lucky to have an employer/ trustees willing to co-operate on a Transfer Out. It is a legal right to do so, but when i tried to exercise that legal right my own trustees threw up every obstruction they could in order to stop me. I've basically given up now, and the scheme has been going down the tubes as I expected it might.

Having seen the Irish Governments intentions are to confiscate people's private savings I'd say you are dead right not to put much faith in there being anything left in 30 years. Get it out of this country if you possibly can.
Good luck!

 

[Conan]

Bilzer,
If your deferred benefit is in a Defined Contribution scheme, then whether you leave it where it is or transfer it to a PRSA or a Buy Out Bond is largely a zero sum game. If however your deferred benefit is from a Defined Benefit scheme then the decision is far more complicated:
- does the transfer value on offer represent "fair value" for the deferred benefit?
- is the previous scheme fully funded or is the transfer value reduced due to underfunding ?
- if you retain the deferred benefit option what is the chances that the fund will actually provide the pension in 30 years time?
- what rate of return would you have to earn on the transfer value to buy an equivalent benefit out of the PRSA/BOB?

I suspect that you will need perfect foresight to figure out what will be the best decision in 30 years time. If you have some 30 years to retirement, one might argue that having a specific amount invested in a PRSA ( rather than a "promised" benefit in 30 years) might be the better option. It's not a simple decision.