Pensions from previous employers

[Monfreid]

Hello,
I have started a new job this year and my employer contributes 6% to my pension if I contribute at least 4%.
I have 2 pensions from previous employers
20K in a PRB
40K in another pension
I'm 46 years old
Should I transfer one of both pensions to my new employer's pension?
What would be best?
I met a Financial adviser who told me that I should keep them separated so that I can apply different strategies
Another one, told me to keep them separated so I can cash in after 50 years old as I might need the money (I don't know but that sounds silly knowing that I don't have too much in total so it wouldn't be wise to cash it in)
What do you think?
Thankl you

 

[kevhenry]

All things being equal, I would keep them separate.

As your advisor said, it's better to have options than not since any money transferred into your new employer scheme would be then subject to the rules of that new scheme.

Your PRB is accessible from age 50 but it would only be accessible from the normal retirement age of the new scheme if it was transferred into it.

I don't know anything about the other 40k fund you have but, if it was in a PRSA for example, then you could do a straight charges comparison and make a decision on that basis.

However, you would have other investment options (i.e. an entire market of providers) that you could explore with that 40k (which you should if you're 46) but you would effectively be foregoing this as an option if you transferred it into the new scheme with its limited range of investment options.

So, all things considered, I would keep them separate and look at where you're at from a strategic standpoint.

For the new scheme, you should sign up and take full advantage of your very generous 6% employer contributions because, after tax relief, you're effectively getting 10% of your gross salary going into a pension at a net cost to you of 2.4% of salary.

That's a return on investment of 316% even before you factor in any fund growth.

Kevin
www.thepensionstore.ie

 

[Monfreid]

@kevhenry

Thank you very much for the info, so it sounds like both advisers were right, just a different way to see things

Your PRB is accessible from age 50 but it would only be accessible from the normal retirement age of the new scheme if it was transferred into it.

Do you mean by that the full 20K will be available to cash in when I turn 50 ? Will I have 25% tax free lump sum and the rest at marginal rate?
This PRB is from a pension of a company that I left in 2008, they did convert in to a PRB a few years later.

I don't know anything about the other 40k fund you have but, if it was in a PRSA for example, then you could do a straight charges comparison and proceed on that basis.

This is a pension from my previous employer, it was a big US company, not sure if it's PRSA or not, I used to 6% and they will put 8%.
So do you mean compares charges between my new pension and this one?

Will I have the same option than the PRB at 50 ?

Thanks again

 

[kevhenry]

The answer to your first two questions can be summarised by saying 'it depends'. Specifically, the way/s you are able to draw on that will, amongst other things, depend on what you were earning in that employment and the number of years you were employed in it.

If it was a big US company then it's unlikely (although not impossible) that it's a PRSA.

Again, moving an old pension from an old employer to a new employer is a risky endeavour because, given the complexity of scheme rules and pension law, you could inadvertently disadvantage yourself for no real benefit.

You should keep them separate and just assess your overall investment strategy instead.

Kevin
www.thepensionstore.ie

 

[Boyd]

Would another consideration be the cost at which you bought into the fund? For example, I have 30k pension with previous employer that I accumulated from 2012-2015. I assume I bought those at cheaper unit prices than now, so selling and rebuying at today's higher prices would be not a good idea?
Also wouldn't management fees of fund A vs fund B would also be a point to check?

 

[LDFerguson]

Would another consideration be the cost at which you bought into the fund? For example, I have 30k pension with previous employer that I accumulated from 2012-2015. I assume I bought those at cheaper unit prices than now, so selling and rebuying at today's higher prices would be not a good idea?

Not necessarily. If we assume that you're going to reinvest in a similar fund to where it is now, then you're selling at the same higher price as what you're buying at so no effect.

Also wouldn't management fees of fund A vs fund B would also be a point to check?

Most definitely. If asked about whether or not to transfer from one pension arrangement to another, or amalgamate I will usually suggest that a number of factors need to be considered: -

• Control. The trustees of the pension scheme retain a certain level of control over an Occupational Pension Scheme fund. For example, you still need the trustees to sign off any requests to retire etc. If you've been gone from the job for decades, you still need to know how to contact the trustees. A PRB / Buy-Out Bond puts the fund into a policy that is yours alone. If considering amalgamating into your current employer's pension scheme, at least you're kicking that can along the road.
• Charges. Evaluate the charges where the fund is now and compare them to its prospective new home.
• Fund choice. Do the funds where it is at present suit your needs, in terms of risk profile, where it is invested etc.?
• Flexibility at retirement - as mentioned above, there are arguments in favour of having multiple pension pots when you retire, as many people don't simply retire from all work on a single day anymore.

Liam D. Ferguson
www.ferga.com

 

[Boyd]

Thanks for that. I checked out the charges, old scheme at .47 AMC and new scheme at .65 AMC. All other things being equal, I guess the .2 differential means leaving it where it is would be most sensible. Downside of old scheme is complete lack of access, no online portal or anything, so I haven't actually seen the balance since 2017, whereas new one is very transparent.

 

[Boyd]

Hmmmmmm now that I think about it, 0.2 percent is only about E60 per year savings in charges.