Old Pension from previous job.

robert18

Hello just wondering could I get a bit off info about a pension I have. I was made redundant 4 years ago from a company, I had built up a pension pot over the 16 years I was there. Now a family friend has suggested that I should bond this pension out. He says that it would be better as I would have more control over it. Could someone explain what this means. I am 38 and have just finished a 4 year college course so will probably be working for another 30 years if I am still around. Thanks for any advice.

coylemj

Is the 'family friend' by any chance working in financial services? Does he have a great scheme by which you can get your hands on the money or why does he think that you need 'more control' over your pension pot - do you or he know more about investments than the people currently managing your former employer's pension scheme?

There's a big scandal in the UK at the moment by which cowboys over there have devised elaborate schemes to allow people to get early access to pension cash, usually involving astronomical charges and an empty pension pot when the victim client reaches retirement age, in return for cash long since spent and forgotten on a car or a fancy holiday.

If you're still in your 30s, I'd leave the money where it is and resist the temptation to move it somewhere where it will probably get hammered by management charges.

robert18

Thanks Coylemj for the reply has me thinking and investigating it a bit more. To be honest have no real knowledge off this type off thing.

keeponhurling

I'd only move it if it was into a pension plan of a new empoyer.

As said, if you move it to some individual plan for yourself charges will be very high.

Liam D Ferguson

keeponhurling wrote: »

As said, if you move it to some individual plan for yourself charges will be very high.

Compared to what? The charges on the pension fund it's already in may be very high. S/he could be able to move it into something with lower charges, thus saving money. Or maybe not. We don't know until we know the actual facts.

Liam D Ferguson

I wrote an FAQ on this subject a while ago, that the OP may find useful.

If the original pension scheme is a Defined Benefit scheme, extra care needs to be taken before thinking about transferring out, as you may lose some valuable guarantees by doing so. On the other hand, if the Defined Benefit scheme is insolvent and is wound up as many are, you may lose those guarantees anyway. See here.

Magf

I also have a pension from a previous job which ended 4 years ago. I wanted to transfer it into a bond also but the penalty to do so was quite substantial. I am turning 50 next year and wish to access the money. I have been told that I should be able to do so, but an unsure as to what amount I can actually get. I know I can get a 25% tax free lump sum, but does the balance have to be taken over a number of years as a pension, or can I get the balance as a taxable lump?

Liam D Ferguson

Magf wrote: »

I also have a pension from a previous job which ended 4 years ago. I wanted to transfer it into a bond also but the penalty to do so was quite substantial. I am turning 50 next year and wish to access the money. I have been told that I should be able to do so, but an unsure as to what amount I can actually get. I know I can get a 25% tax free lump sum, but does the balance have to be taken over a number of years as a pension, or can I get the balance as a taxable lump?

The 25% lump sum assumes that your pension fund is NOT in a Defined Benefit pension scheme at present. The 25% calculation doesn't apply to DB schemes.

In any event, there's a second method of calculating your tax-free lump sum - it relates to the number of years you worked for the company and your final salary when you left. Sometimes it can work out at greater than 25%; sometimes less. Worth looking at both calculations though.

Depending on your personal circumstances, typically the balance after taking your lump sum would be used to buy an annuity or an Approved Retirement Fund or Approved Minimum Retirement Fund.

You can withdraw the balance as a taxable lump sum only in one of the following circumstances: -

• You have a pension from somewhere else of at least €12,700 per year.
• You already have €63,500 in an AMRF or Vested PRSA.
• Your fund after withdrawing the tax-free lump sum is less than €20,000 and you have no other pension funds.

Magf

Thanks for the info Liam. It's a defined contribution scheme. I worked for the company for 25 years and was in pension scheme for 15. Do you have the formula for calculating the tax free lump sum on this basis please? Many thanks

Liam D Ferguson

The formulae are in Chapter 9 of the Revenue pensions manual.

But if I was you, I'd be inclined to cheat. Get on to whoever administers the pension scheme and ask them to calculate your maximum tax-free lump sum using the "old rules" based on salary and service.

In some instances, using the old rules can calculate a tax-free lump that's equal to or greater than the entire fund. If so, happy days as it means you can withdraw the entire fund as a tax-free lump sum.

If not, the only problem with using the old rules is that if you do AND if the remaining fund is over €20,000, you have no choice but to buy an annuity with the balance of the fund. Some people don't like an annuity because it's inflexible and annuity rates aren't great at the moment, especially for someone who's only 50.

Magf

Thanks Liam, you have been very helpful.

robert18

Lads I wanted to say thanks for replying to me, all this pension stuff is new to me. I think I will just leave the pension where it is as it seems that maybe it would just cause a lot off hassle for me. Thanks again.