Stay in former occupational pension depsite possible complications?

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whytis

Registered User
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Hello,

At a former employer's, I have €30,000 in an occupational pension scheme, at 0.65% annual management fees. 30 years till retirement.

Are occupational pension schemes something you should move out of, for example into a personal retirement bond, because of possible complications of getting your money out of the scheme eventually? (Complications could be pension scheme is moved to another provider, the company is wound up in 30 years, or maybe they change the available funds over time.)

The financial management company involved has offered a PRB with 1% annual fee and 98% allocation. I've run a calculation: assuming 5% annual rate of return, my investments would be hypothetically €13,000 lower by leaving the current occupational scheme of my former employer.

Thanks,
Whytis
 
The trustees can't offer you to transfer out and leave you in a worse off position than if you stayed. Losing 2% of your contribution and a higher amc is certainly doing that. Based on those figures, the advisor is getting paid €1,500 (5%) to transfer the funds out.

There are certainly better value contracts out there.

Whether to stay or leave the benefits there, 30 years is a long time to leave the benefits there. You need the trustee to sign off on the pension when you want to get it out or the liquidator if the company has been wound up. This alone can prove difficult.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Your fund is currently in an Occupational Pension Scheme which is a contract between the pension company (e.g. Irish Life or Standard Life etc.) and the trustee of the pension scheme. The trustee of the pension scheme might be your former employer, it might be individual people or it might be a third-party professional pension trustee company. As long as your fund remains in the scheme, the trustee can make certain choices unilaterally - the trustee can move the scheme to another provider, which would include your fund. The trustee could wind the scheme up, which would result in your fund being transferred out to a PRB anyway. Bear in mind that the trustee has a legal responsibility to act in the best interests of scheme members. So in theory the trustee shouldn't make any decisions unless they are to your benefit. If you want to withdraw money from the scheme (including moving to a PRB of your own choosing, moving to another employer's Occupational Pension Scheme or in the future, retiring) you will need to get the trustee to counter-sign your instructions. So if you decide to leave your fund in the scheme, you'll need to keep track of the whereabouts of the scheme trustee. With 30 years to go, I think I'd be inclined to move it - either into your own PRB or your current employer's pension scheme, if it's better. Charges on the PRB you've been offered do look high.

Regards,

Liam
http://ferga.com
 
Thank you, your replies have convinced me to move out of my former employer's scheme, despite that being the lowest fees available to me.

Yes, my current employer has a scheme I can move to, which is 1% annual management fee (despite it being a passive index fund I choose) and 100% allocation.

So moving to my current employer's scheme looks to be the best option,
over the more expensive PRB option.

Whytis
 
LDFerguson said:
Your fund is currently in an Occupational Pension Scheme which is a contract between the pension company (e.g. Irish Life or Standard Life etc.) and the trustee of the pension scheme. The trustee of the pension scheme might be your former employer, it might be individual people or it might be a third-party professional pension trustee company. As long as your fund remains in the scheme, the trustee can make certain choices unilaterally - the trustee can move the scheme to another provider, which would include your fund. The trustee could wind the scheme up, which would result in your fund being transferred out to a PRB anyway. Bear in mind that the trustee has a legal responsibility to act in the best interests of scheme members. So in theory the trustee shouldn't make any decisions unless they are to your benefit. If you want to withdraw money from the scheme (including moving to a PRB of your own choosing, moving to another employer's Occupational Pension Scheme or in the future, retiring) you will need to get the trustee to counter-sign your instructions. So if you decide to leave your fund in the scheme, you'll need to keep track of the whereabouts of the scheme trustee. With 30 years to go, I think I'd be inclined to move it - either into your own PRB or your current employer's pension scheme, if it's better. Charges on the PRB you've been offered do look high.

Regards,

Liam
http://ferga.com
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Out of interest why is a buy out bond with lower fees not on the table, There are advantage of keeping it seperate from present Employer scheme it could be cashed in at a younger age,I know lots of people who left it in original employers fund He/she may be 30 years from retirement but if left where it is or put in a buy out bond it is quite possible the can cash it in possibly in 15 years depending on there age no one asked what age they are at present,
 
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RETIRED2017 said:
Out of interest why is a buy out bond not on the table, There are advantage of keeping it seperate from present Employer scheme it could be cashed in at a younger age,I know lots of people who left it in original employers fund He/she may be 30 years from retirement but if left where it is or put in a buy out bond it is quite possible the can cash it in possibly in 15 years depending on there age no one asked what age they are at present,
Click to expand...

It wasn't off the table. He mentioned PRB's
 
@RETIRED2017 Lower than what? The financial company has offered a 1% PRB with 98% allocation. Sounds like they're not prepared to go lower.
 
Hi whytis,

Just playing the advocate of de devil! Before you pull the trigger on this one, can you explain to me how much you expect to pay in additional fees by moving to your current employer's scheme over the next 30 years and why you believe this is additional cost is justified please? [FWIW, I have reached the opposite conclusion to you!]
 
You are not restricted to the PRB that has been presented to you.

You can go with the PRB of your choice.

Talk to SBarrett, LDFerguson, or one of the other good intermediaries who post here.

It rarely makes sense to move one’s benefits into a new employer’s scheme as you then lose the ability to access your fund at age 50 (without leaving your new job).
 
elacsaplau said:
Hi whytis,

Just playing the advocate of de devil! Before you pull the trigger on this one, can you explain to me how much you expect to pay in additional fees by moving to your current employer's scheme over the next 30 years and why you believe this is additional cost is justified please? [FWIW, I have reached the opposite conclusion to you!]
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If he was still employer by this company I suspect He would still be happy how the fund is preforming and staying in the pension scheme /fund, Op should have a hand book on the scheme or should be able to get one,
If the company is healthy and his fund is well managed and growing at the same rate as existing employees at 0.65% and he can take from the fund at age 50 with no restrictions

Is there a reason why you expect to run into more Complications with this companies pension scheme than your new employer scheme both are run for the benefit of employees,
 
whytis said:
@RETIRED2017 Lower than what? The financial company has offered a 1% PRB with 98% allocation. Sounds like they're not prepared to go lower.
Click to expand...
Is there any chance employer is paying the financial company for advice if left in existing scheme /fund and they are looking for 1% PRB because they will no longer be getting this money on your pension pot,
 
So here are the figures of my current top options:

1. Keep funds in former employer's scheme, 0.65% annual fee
2. Move funds to current employer's scheme, 1% annual fee

I would have €10,700 less with the second option, after a hypothetical 30 years investment at 5% annual returns.

Is it worth forgoing that potential €10,700, so as not to have funds in an old employer's scheme?
 
Hi whytis,

If you figure that paying €10k+ extra is worth it so that you can have less flexibility - then you should certainly go for it!!;)
 
whytis said:
So here are the figures of my current top options:

1. Keep funds in former employer's scheme, 0.65% annual fee
2. Move funds to current employer's scheme, 1% annual fee

I would have €10,700 less with the second option, after a hypothetical 30 years investment at 5% annual returns.

Is it worth forgoing that potential €10,700, so as not to have funds in an old employer's scheme?
Click to expand...

You do have a third option of moving to a PRB of your own choosing with 0.65% annual fee.
 
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