Just left a company what should I do with my Pension??

I've just left a multinational and the pension providers Mercier have sent me the statement \ balance which is 20k.

My question is, ....I have been provided with two options by the above company, on a defined contribution plan.

1. Preserved benefit payable at normal retirement date

2.Transfer of Benefit

I don't have a clue what to do with this but I need to get an answer back to them.

I've been really brief with my question but as regards the options I just don't know which one to choose. I presume there is no way of getting this as cash ?? or if it was possible without it being taxed??

I hear people saying ah there are ways around that..but of course no one can tell me what ways they're are around it,,,,

Unless you have been in the scheme less than two years then you cannot get a refund of your personal and AVC contributions (but not employer contributions) which would be subject to 23% (?) tax.

There is no simple answer to your question about what to do. You should be able to leave your money in the existing employer's fund, transfer into another employer's occupational scheme (now or later on) or transfer the fund to a buy out bond which is a personally held pension investment plan (i.e. you will no longer have any dependency on the original scheme, chasing trustees for signatures at retirment etc.). With any of these transfers you should weigh up the costs (e.g. charges - both up front and ongoing) and benefits (e.g. easier administration, no need to chase trustees in decades to come, better choice/range of funds, lower costs etc.) involved. If in doubt get independent, professional advice on the matter.

thank you clubman, I was thinking of passing it by someone who deals with them on a daily basis, I've been there around 5 years and I'm not sure about career direction at present. Pensions are so bad these days it doesn't seem worth carrying on to the next employer as is... but whos to know. As you say I reckon I'll pass it by someone,

thanks again,

dimo said:

I was thinking of passing it by someone who deals with them on a daily basis

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Make sure that they are qualified and authorised to give you independent, professional advice and do not have a vested interest in steering you in a particular direction.

Pensions are so bad these days it doesn't seem worth carrying on to the next employer as is...

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I don't understand what you mean about pensions being "bad" or it not being worth carrying an existing pension over to a new employer's scheme? Remember that pensions are the longest term investment that most people will ever make so to judge their performance over the short term doesn't really make sense.

ClubMan has outlined the options very well, I think. The third option that you need to evaluate is leaving the fund where it is until retirement.

I'm also intrigued by the "pensions are so bad these days" comment. When Managed Pension Funds in general are dropping in value, as they do from time to time, you tend to hear such comments, often fuelled by sections of the media, who clearly don't understand the meaning of the expression "values can go down as well as up."

But given that the average Irish Managed Pension Fund has produced positive returns over the past one (+18%) and even three years (+9% per annum), I take it it's not a performance issue.

Unless you have good reason to do anything else, leaving it where it is should be the preferable option.

Why? €20k is not a lot of money in pension terms. Moving it without independent advice (which would not be cheap) would be simply gambling. You'd also most likely find yourself exposed to other commissions and charges.

By the time you've paid all these, any marginally better performance you might get on the capital sum will have probably been swallowed up.

The real trick of course is to keep a record of where all your little bits of pension are so that you (or your heirs and successors) don't miss out on any of them when the big day finally arrives (i.e. retirement or the other more, eh, permanent event).

Personally I'd be more inclined towards the transfer into another employer scheme or to a buy out bond. The latter on the basis that tracking down the original scheme trustees etc. might be hassle in years to come and the fact that annual statements on paid up funds are not mandatory so you may lose track of the fund. Having it in your current employer's scheme at least means that you can keep better track of it. Having it in a buy out bond means that you have a personally owned and controlled investment. However you should definitely pay close attention to the implications (e.g. charges, administration issues, choice of funds etc.) involved in any transfer and, as already stated, get independent, professional advice if you are not sure what the best strategy is.

While ClubMan is offering sound advice, there is one benefit from not transferring it into your new employer's scheme that is difficult to quantify but substantial nonetheless....having entitlements from more than one occupational scheme spreads the risk. Not all such schemes are managed at an equal level of competence.

And as for the complexity that multiple pension entitlements creates? Frankly, if you can't be bothered to keep in contact with people who will fund your retirement, tough.

Another issue on transferring into another occupational scheme is that you also transfer in service time from the previous pension(s) which means that you can benefit from securing benefits bought by employer contributions sooner than might normally be the case. For example, if you had a certain number of years served in an existing scheme and transferred it into another employer scheme then these years are taken as if you had served them in the new scheme for the purposes of deciding at what point any subsequent employer contributions are secured and not lost when you leave within the normal vesting period (two years I think) for the new scheme. (Hope that makes sense because I think I'm making it more convoluted than necessary!). As ever, you can see that there are always different pros and cons, costs and benefits and tradeoffs in making a decision such as this which is why an independent, professional advisor may be the best bet for getting thorough advice based on a comprehensive analysis of your situation and options.

And as for the complexity that multiple pension entitlements creates? Frankly, if you can't be bothered to keep in contact with people who will fund your retirement, tough.

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But that is not the only situation in which problems can arise. For example, a former employer scheme of mine is currently being wound up, as is the company, imminently and former employees should be presented with transfer options anon but I only know about this because I heard it on the grapevine. If I had changed address or lost contact with the relevant parties then I could find myself looking for the trustees (who at that stage are long gone) to release my fund at retirement and then having to hunt down the company liquidator or a representative (which could be difficult) with a good chance that I would have to incur delays while the matter reverted to the Pensions Board to sort out. Note also that where an individual has a paid up occupational fund they are not automatically entitled to annual statements as long as no contributions are going in and many pension underwriters do not issue them unilaterally which can lead to difficulty in tracking existing pension investments. And don't forget that in the case of a sudden death the next of kin/estate may have difficulty in tracing pension and other investments. I agree that the reponsibility for tracking these issues ultimately lies with the individual but there is so much complication in the pension area at the best of times that sometimes ease of administration by consolidating funds into one place might be beneficial. I myself have about half a dozen funds of different types in place and find it quite difficult to keep track of them!

interesting debate......can i add a question to it that I asked some weeks back with no answers.......what you would you do with the same 20k(which is the value of my fund), if you the job you were offered was in the public sector???
The options in that case are I assume to leave it or invoke a personal buy out bond...i assume I can't use it in any way towards buying back reckonable service in the public service??? Which is a pain...

legend99 said:

i assume I can't use it in any way towards buying back reckonable service in the public service??? Which is a pain...

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That's my understanding - but, of course, you could probably purchase notional service (or could certainly buy AVCs) to make up for any anticipated pension shortfall on retirement....and you'd be entitled to full tax relief on the cost of such. Given that you've already received tax relief on the contributions you made towards the €20k in your current fund, it's probably fair enough that you can't get another tranche of tax relief.

But do get some advice - hope I'm wrong for your sake.

legend99 said:

interesting debate......can i add a question to it that I asked some weeks back with no answers.......what you would you do with the same 20k(which is the value of my fund), if you the job you were offered was in the public sector???
The options in that case are I assume to leave it or invoke a personal buy out bond...i assume I can't use it in any way towards buying back reckonable service in the public service??? Which is a pain...

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I don't know the ins and outs of public/civil service pensions and buying back service and all that but if the options were leave it there or transfer to a buy out bond then the decision would depend on charges, fund selection available, administrative ease, quality of service etc. All things being equal I would probably opt for a buy out bond.