Pension question. Need answers.

Little Bubbles

I joined my first company in 2000 and I paid paid pension with them till I left in 2008. I started a new job and joined there pension system. Had a meeting with new company's pension group and they have me for pension starting from 2008. My question is can I get any money from my old pension I had with first company or what has happened to it. If anyone can answer please do.

Little Bubbles

Any answers????

coylemj

If the old scheme and the new scheme are approved by the Revenue Commissioners, there is no legal impediment stopping you from moving the money over to the new scheme. Talk to the HR people in your old company. If they agree to do this, you will not get your hands on the money, it will be transferred direct from one scheme to the other.

BUT, if the old scheme was defined benefit (DB), do not move it, leave it there and take the benefit as a pension when you reach retirement age.

Kennie1

mj's advice regarding transfering out of DB schemes would be considered right up until recently but with so many DB schemes in trouble at the moment and given the fact that a lot of schemes are currently looking to reduce benefits to get out of this trouble it may be worth getting professional advice.

Don't pick me up wrong though I am not advicing anyone to transfer out of DB scheme's, I am only pointing out that it should be not be ruled out in certain circumstances.

homer911

First step should be to contact your original company and ask them to request the actuaries to provide you with an up to date statement of benefits. This will outline the value of the fund and options available to you and include forms to sign should you choose to transfer it

Little Bubbles

Ok got reply from my old pension scheme people and they gave me these options.. Can ye tell me which would be the best one..

Transfer Payment (€xxxxxx) to your new Company’s Pension Plan

Deferred Retirement Benefit from the Plan

Transfer Payment (€xxxxxx) to a Pension Transfer Bond (Buy-Out Bond)

Transfer Payment (€xxxxx) to a PRSA

These all are double dutch to me.. Any advice is welcome.

Also what is a bond buy out??

Little Bubbles

Bump

coylemj

Ask your former employer if the scheme was Defined Benefit (DB) or Defined Contribution (DC), the action you should take depends on which type of scheme it was.

If it was a DC scheme then you should probably get the money moved over to your new employer's scheme, you will need the new employer to approve this move but it shouldn't be a problem.

If it was a DB scheme I'd leave it where it is because typically money cannot buy the benefits you get in a DB scheme. BUT, what poster kennie1 said above is valid - if you think there is any chance that your former employer might underfund the scheme and it might get into trouble in the future, you might be better off taking the money out and putting it into your current scheme as with the DC option. If your former employer is a rock solid entity like a semi-state or CRH or similar and it's a DB scheme, I'd leave the money where it is.

kaymin

Sounds like the OPs pension scheme is DB. I'm in a similar situation. Pension scheme offered me 4 times my deferred annual benefit compared to around the 21 times it would cost to buy that annual benefit (based on my knowledge of what pensions you can buy with lump sums). Annual benefit will increase at the lower of the CPI and 4% until retirement date. The offer seems derisory to me. I've 30 years to retirement and I'm not au fait with all the actuarial calculations but surely I should be getting a lump sum offer of alot more than 4 times the defined annual benefit. Any actuaries out there that want to give their view?

Sorry to hi-jack the OPs thread but I suspect the above is relevant to your decision.

coylemj

kaymin wrote: »

Sounds like the OPs pension scheme is DB. I'm in a similar situation. Pension scheme offered me 4 times my deferred annual benefit compared to around the 21 times it would cost to buy that annual benefit (based on my knowledge of what pensions you can buy with lump sums). Annual benefit will increase at the lower of the CPI and 4% until retirement date. The offer seems derisory to me. I've 30 years to retirement and I'm not au fait with all the actuarial calculations but surely I should be getting a lump sum offer of alot more than 4 times the defined annual benefit. Any actuaries out there that want to give their view?

Sorry to hi-jack the OPs thread but I suspect the above is relevant to your decision.

If your retirement is 30 years away then the current value of your pension isn't anything like 21 times the annual benefit.

If you were retiring tomorrow then being offered 4X would be derisory but over 30 years the stock market will beat inflation so the current value of the pension would be a lot less than 21X.

Either way, leave the money where it is would be my advice.

kaymin

coylemj wrote: »

kaymin wrote: »

Sounds like the OPs pension scheme is DB. I'm in a similar situation. Pension scheme offered me 4 times my deferred annual benefit compared to around the 21 times it would cost to buy that annual benefit (based on my knowledge of what pensions you can buy with lump sums). Annual benefit will increase at the lower of the CPI and 4% until retirement date. The offer seems derisory to me. I've 30 years to retirement and I'm not au fait with all the actuarial calculations but surely I should be getting a lump sum offer of alot more than 4 times the defined annual benefit. Any actuaries out there that want to give their view?

Sorry to hi-jack the OPs thread but I suspect the above is relevant to your decision.

If your retirement is 30 years away then the current value of your pension isn't anything like 21 times the annual benefit.

If you were retiring tomorrow then being offered 4X would be derisory but over 30 years the stock market will beat inflation so the current value of the pension would be a lot less than 21X.

Either way, leave the money where it is would be my advice.

Thanks for your response. If my annual benefit increases at the lower of CPI and 4% ( which I expect will turn out to be CPI if we stay in the euro) then the present value today will equate to the present value in 30 years time using CPI as the discount rate. As you said it boils down to actuarial assumptions and the fact they discount my pension using higher return rates than CPI - I wouldn't buy into their assumed return rates though given the rubbish actual returns achieved in the last 10 years - so yeah, sticking with the defined benefit seems the way to go.

Leprechaun77

Whilst it is nearly always better to keep accrued benefits within the DB scheme, I believe it is important to factor in the EMPLOYER and how financially sound this company is. Remember, the benefits you get as part of a DB scheme are NOT guaranteed...it is more like a 'promise' of a certain pension.

I would therefore factor in the risk of the company scheme not being able to sustain such payments. These schemes are valued every three years to see if there is enough of a fund to pay the schemes liabilities. As of last year, I read an article to say that over 80% these funds are underfunded. In this case the employer is obliged to bring them back in line by making further payments. With further stock Market falls and an overall volatility in these investment markets, it is likely that most funds are still 'underwater'.

It is for this reason I would suggest to assess the employers long term ability to meet these commitments ....is the company 'APPLE' or 'Joe Johnson Construction and Development Ltd'?

kaymin

Leprechaun77 wrote: »

It is for this reason I would suggest to assess the employers long term ability to meet these commitments ....is the company 'APPLE' or 'Joe Johnson Construction and Development Ltd'?

Thanks for the advice - my previous employer is fairly solid - it's in a slow growth but stable industry so it's a safer bet than most.