Transferring to PRB

P

pauline1959

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Hello. I would like to transfer my deferred pension fund of €140,000 to a Personal Retirement Bond. What options do I have and how do I go about it? I am medically retired and 57 years old. Thank you.
 
Hi Pauline

Don't you also want to draw down your tax free lump sum too?

So what you will be doing is maturing the pension plan where it is, no need to transfer to a PRB first to do it.

To make things complicated, there are two routes you can take.

1. Tax-free lump sum based on years service and final salary. As you are medically retired, you can use the additional years you would have worked too in calculating the lump sum. With the remainder, you purchase an annuity which is payable to you for the rest of your life. As you are medically retired, there is a chance you can get an enhanced annuity rate for medical reasons i.e. actuarially, the life company do not expect a sick person to live as long as a healthy person so they will pay a higher amount for what they estimate will be a shorter period (sorry to be blunt about this but that's the reason!). The annuity dies with you.

2. Take 25% of the value of the fund tax-free i.e. €35,000. €63,500 of the rest can go into an AMRF and €41,500 goes into an ARF or you can take it as cash and pay income tax on it. The AMRF/ ARF is the exact same as a pension fund in that it is invested in funds (you select the funds based on your needs, attitude to risk and ability to take risk - a good advisor will help you with this), except you can take money out of them. With the AMRF policy, the maximum you can take out is 4% per annum until you are 75, when you can take out as much as you want. If there is any money left on death, it passes to your estate.


They are you options in a nutshell.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Hi Pauline,

There are a couple of items you will need to consider and I would approach them in the following order.

  1. Do you need either of the tax free cash or retirement income ( Annuity or ARF) from this pension right now? If you do not need the income then you can transfer the pension into a PRB and hopefully both the tax free cash amout and pension income will be higher when you draw them down in the future. If you need the tax free cash and/or pension income now , then as Steven suggests you will retire the pension by taking the tax free cash now and selcting the Annuity or ARF option.
  2. As Steven suggest look at both options to see how you might maximise the amount of tax free cash you can receive
  3. At the same time consider the ARF versus Annuity option carefully and Steven's point re the potential of an enhanced annuity is important.
  4. If the decision is to either keep the funds in a PRB (point 1 above) or to take the ARF option now (point 3) then you need to consider which provider offers the better value in terms of costs ( annual charges and allocation rates) and also in terms of after cost investment returns. As part of this you should consider what investment approach or strategy suits your preferences/needs best. After this you should be in a position to make an informed decision.
If you have the time and interest you should be able to do most of the above yourself. If you have neither the time nor interest then pay an adviser a fee to review the points above and come back to you with recommendations on same. Make sure you get clarity from the adviser on all costs involved. It is an important decision and I think you will benefit from investing some time and effort into making the decision that feels best fit for you. I hope this helps.
All the best. Vincent
 
Hello Steven and Vincent.

Thank you for your extremely helpful replies and yes, I am very interested in accessing a lump sum.
Steven regarding option 1 of your reply. This pension has been frozen since I left service in 2006 but I was not medically retired until 2008. I did not have any other pension in between or after. Will this have a bearing on the options?

Again thank you both and I now feel confident to approach a financial advisor.

Best regards,
Pauline.
 
Hi Pauline

For the calculation of your tax free lump sum, when your pension was frozen has no bearing on the calculation. For this medically retired, Revenue rules says to assume that you worked until normal retirement age.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Hi Pauline,

Just for the avoidance of doubt, is your pension fund coming from a defined benefit (rather than defined contribution plan)?

Steven,

Are you sure that a deferred pensioner can obtain the "early retirement" concessions in the case of ill-health early retirement. I thought that the assumed service provision to normal retirement applied to medically unfit current employees (rather than deferred members)?
 
p.s.

What tax rate is used in option 2 above for the balance of the fund?

Thanks again,
Pauline.
 
Hi Pauline

Apologies for my confusing post (#6) - I was addressing you first, then Steven!

I should leave this for the experts - Steven or Vincent/North Star to respond more fully.

All I can say is that the fact the TV is in respect of a Defined Benefit (DB) plan makes the decision you are facing even more complex. By all means seek to obtain as much info as you can via this forum. However, I would strongly advise you to seek advice from an advisor that works for a fee before making any decisions.

The type of info that any adviser (whether in this forum or elsewhere) will need to know would include the following:

1. What is the amount of your pension at normal retirement from the DB plan?
2. What is the quality of the pension - does it increase in payment, does it pass on to your spouse upon death in retirement, etc.?
3. What happens the DB pension if you die before retirement?
4. What options are available to you in relation to the early payment of this pension?
5. Is the €140,000 mentioned the current transfer value?
6. Has this amount been adjusted in any way - for example, to reflect the solvency level of the plan?
7. What is the solvency level of the plan?
8. Have the Trustees assessed the extent to which the employer is committed to the plan (the employer covenant)?
9. What is your state of health?
10. What is your overall financial and family situation?

Hope this helps....
 
Hi Dan.

Thank you for replyong. I pretty much have all the most up to date info you are talking about above to take to a financial advisor which I will do asap.

Best regards
Pauline.
 
Dan Murray said:
Steven,

Are you sure that a deferred pensioner can obtain the "early retirement" concessions in the case of ill-health early retirement. I thought that the assumed service provision to normal retirement applied to medically unfit current employees (rather than deferred members)?
Click to expand...

Hi Dan

I am working on the assumption that Pauline was on sick leave for 2 years and took ill health early retirement after that period.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
Hi Steven & Dan.

I worked for approximately 1 year after the plan was frozen and before my illness occurred. I did not enter any other pension scheme.

I really want to get the biggest lump sum possible and would appreciate knowing in your opinion what is the best option to take.

The transfer value is €142,045 as of end of May 2016. Early retirement from the plan is not an option, the value does increase over time and does go into my estate should I die before retirement age. The plan is solvent and fully funded. My general health is less than average, .one off the reasons why I am acting now. I have been given options to transfer to an approved occupational pension scheme, transfer to an approved insurance contract (PRB) or transfer to a PRSA.

My final salary at leaving in 2004 was €39,296 final pensionable salary is €26,011.

Pension payable from normal retirement date 05/97/2024 currently is €11,849 p.a.
Pensionable service at exit was 27 years.

That's about all the info I have gentlemen.
I really appreciate your help with this.

Best regards
Pauline.
 
I think you misunderstood me Dan. I was only clarifying my marital status to show that if I died the DP would go to my estate rather than a spouse.
 
Hi Pauline, As Dan mentioned above the option of transferring a DB pension into a PRB is complex with many issues to consider.
Is the transfer value a 'normal'transfer value or have you contacted the scheme administrator and asked if they will offer an enhanced transfer value if you were to transfer your DB benefits out? I would do this first and then the other issues can be looked at in turn.
 
I contacted the administration of the plan and I received a statement of the current status of the DP. The transfer value is the current value.
 
Hi Pauline, you should specifically enquire as to whether or not the administrators would consider an enhanced transfer value if you were to move your benefits out of the scheme. There are plenty of schemes where such enhanced transfer values were/are on offer as the employers struggle to manage the long term pension liabilities. Depending on age, solvency of the scheme etc the enhanced transfer value can be materially higher. Its worth asking...
 
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