occupational pension transfered to personal pension?

mar12345

Hi,

I used to work for a large multinational company, and joined their occupational pension scheme (managed by Aon). I left about 2 years later, but kept my contributions there.

I am now working freelance and started a personal pension, still with Aon.
They have contacted me on many occasions to transfer my first pension into the personal scheme. Aon assures me that both schemes are exactly the same and that it would just makes it easier to merge both pensions.

What are your thoughts? Should I do it? I could also start contributing towards the occupational pension instead?

Liam D Ferguson

I'm assuming that your personal plan is a PRSA.

I'd ask Aon to provide confirmation in writing the reasons why they believe that such a transfer is in your best interests. Particularly I'd ask them to detail the charges and funds where your Occupational Pension Scheme fund currently resides compared with the charges and funds in your PRSA.

There's an advantage to transferring out of the Occupational Pension Scheme as you take control of your fund and don't have to refer back to the scheme trustees every time you want to do something with it.

On the other hand, by rolling your two funds together, you can only "retire" once. By keeping them in separate vehicles, you can draw them at different times when you retire.

coylemj

If the company pension scheme was Defined Contribution (DC) then it probably makes sense to merge them but the company scheme may have lower annual charges than your personal pension. Ask Aon if there will be any difference in the charges. The fund choices will probably be the same for a company DC scheme as your PRSA scheme given that they are both with Aon.

If the company scheme was Defined Benefit (DB), do not move it under any circumstances.

Kennie1

There is major differences between Occ pension and a personal pension in the manner in which you can draw down benefits. To give a example of just one, the method in which you can claim tax free cash from a Occ is usually 3/80 of your salary x years service where as a PRSA/Personal Pension is 25% of fund is paid as tax free cash.

If you transfer to a PRSA as Liam D Ferguson indicated you will then have to claim benefits together where as if you leave your fund where it is you may be able to claim benefits as the age of 50 with the trustees permission if they are not willing at that stage you may transfer to a buy out bond and then claim benefits.

There may also be inheritance tax issues in transfering to a PRSA where if you were to prematurly die, the Occ fund may be treated differently to a PRSA.

Perhaps you should get a second unbiased opinion/advice

coylemj

For only two years contributions - is it worth keeping them separate, even for all those good reasons?

Kennie1

coylemj wrote: »

For only two years contributions - is it worth keeping them separate, even for all those good reasons?

Did not pick up that the OP had only 2 years service:o.

Even so I can not see any great advantage merging both pensions together. I suppose that it may be handy to have all together when you are at retirement age...saves the need to fill multible pension claim forms.

Fact is now a days most insured DC schemes trust rules allow the member to pick what ever funds are available to the scheme. Giving a guess that the OP only has a small fund there may be a very high up front set up charge.

coylemj

I doubt he'll be charged a 'setup' fee given that he would be moving his money to an existing PRSA within the same company and anyway it's Aon who are actively encouraging him to move his money from the company fund to his own PRSA so he should be able to dictate terms.

All he has to do is say that he will elect to move the money provided that if there has to be a fund switch, it is done on a bid/bid basis i.e. no bid/offer penalty and no setup fee.

Kennie1

Valid point but we are assuming that Aon was advising to move to a PRSA, I would think it more likely that Aon was advising at the time to move the fund into a BOB. I would assume this as the case as Aon assured the OP that the schemes were the exact same. Pretty much the same rules apply when claiming benefits from a BOB or Occ Scheme.

Its uncommon where it makes better sense to transfer to a PRSA rather than to a BOB. The most common reason to transfer to a PRSA is where the Scheme fund is small, there can be up to a 5% of the entrie fund as an up front charge to set up a BOB. In these cases it may make more sense to leave the fund where it is so as the member can avail of retirement benefits when he/she turns 50 if they so choose to.

If that person was to transfer to a PRSA they would lock in that money to the PRSA and so remove the right to claim benefits at age 50 and in most cases would have to wait to at least 60 before they could claim benefits from the PRSA.

HowFinancial

Normally it works out best if you transfer DC Occupational Pension Scheme Benefits to a Buy Out Bond (Personal Retirement Bond), as regardless of how long you were a member of the scheme all your years service at that company will count when it comes to maximizing your Tax Free Lump Sum at retirement.

However, be careful of loosing vested rights if you were a member of the scheme for less than 2 years. i.e. loosing employers portion of contributions if you transfer anywhere.

See what Aon suggest and crosscheck that against what another independent financial advisor can offer you. If you don't know a financial advisor you can trust ask a friend to recommend one.

Regarding your pension planning going forward good info at this link
http://howfinancial.blogspot.ie/2011/05/retirement-planning-for-self-employed.html