Deferred Pensions
According to a study commissioned by the Association of Accounting Technicians in the UK, the average person will change jobs six times during their working life. This could result in having membership in six different pension schemes. It is believed that the statistics for Ireland would be broadly similar.
The difficulty for many individuals is keeping track of their different pensions. In fact, many people can forget that they have pension benefits from past employments and may end up never claiming their full entitlements. Benefits from past employments are called deferred pensions and will remain invested until the normal retirement age of the scheme. In certain circumstances, you may be able to access these funds before reaching that age.
The question remains, what should you do with your pension funds if you change employer or the pension scheme is wound up? You should consider carefully how to manage your deferred pensions, as you have a number of options;
- Leave your deferred pension where it is, in the previous employer’s scheme (not possible where the scheme is wound up)
- Transfer your fund to your new employer scheme
- Transfer to a PRSA (subject to certain restrictions)
- Transfer to Personal Retirement Bond (Buy Out Bond)
Before deciding what to do, it is extremely important to consider the following;
- What funds are your deferred pensions invested in?
- Are you receiving annual updates on the performance of your pension funds?
- Do these funds match your appetite for investment risk?
- What other fund choices are available within the scheme?
- Which option is the most suitable for your needs and/or has the most competitive charges?
- What income do you need in retirement and what level of investment risk should you take with your deferred pensions to reach your goal?
- What further level of contributions do you need to make to reach your targeted retirement fund?
- Is proper retirement planning advice freely available from the pension administrators?
Like most things financial, when you are looking at options that could have an impact on your income and lifestyle, you should invest in professional advice. By engaging a retirement planning advisor, you will be able to keep track of your various pensions, choose the right options for your needs and achieve your overall retirement objectives.
MoneyCoach has a team of retirement planning professionals who are happy to listen to your needs and help you find the most appropriate solutions. Please contact us on 01 669 1040 or info@moneycoach.ie
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