No Pension - Again!

Dedalus1

I'm moving jobs and my DC/DB pensions are being refunded to me less 20% tax, because I haven't two years of member service in them. I'm 2 months off 2 years.

That's fine, I knew that. But I didn't know they'd just be refunded to me. I thought I'd have time to begin the new pension with the new company, and transfer it across.

I'm 31 years old, I had no pension until I was 29. I did a doctorate, spent 2 years adjunct lecturing, and one year on a temp contract that arranged no pension (I now know I should have done it, but they never mentioned a PRSA).

Now it's back to the drawing board. All that hard work is completely wasted. 31 years old and I have to start building my pension again. I just hope, since I'm moving for a 35% pay rise that this will even out in the long run.

With my new company, (I end with my current on the 23rd and start with the new in May), I have to open a PRSA. There's no company pension, but they match contributions.

Is there anything I can do at this point to improve my position?

Jim2007

There is nothing stopping you from saving for your future.... in the worst case you just won’t get the tax advantage you might get otherwise.

At 31, that means you have about 35 years to go before pension age and that is ample time to build up a pension fund. Over that period max out all possible pension options that arise and add to it with personal investment and savings.

tjhook

If you're getting a refund, can you just put it into your new pension? Effectively "transfer it across" yourself?

At age 31, you can contribute up to 20% of your gross income into a pension each year while still taking advantage of tax relief at your marginal rate.

Allinall

tjhook wrote: »

If you're getting a refund, can you just put it into your new pension? Effectively "transfer it across" yourself?

At age 31, you can contribute up to 20% of your gross income into a pension each year while still taking advantage of tax relief at your marginal rate.

This!

You will get at least 20% tax relief on putting it into a new pension, so will be at no loss.

tjhook

Just to add, I believe for a PRSA your own contributions are added to your employer's in calculating the amount that may receive tax relief. At your age, the two added together contribute towards the 20% limit for tax relief.

If adding your lump sum puts you slightly over this 20%, you could always put the surplus aside until next year before adding it to your fund. Just to maximise the tax relief.

Henry Ford III

Is a refund of contributuons your only option op?

Dedalus1

Thanks for all your contributions here. It's really very helpful!

I've since learned, after furious googling, that I'm only being refunded my contributions. This makes the pot almost worthless.

The letter I received from HR said it would be refunded to me, and the pension administrator would write to me within 2 months of my end of employment date.

It may be possible for me, then, to have set up the PRSA with the new employer. Is it possible for me to be able to transfer the pension across and keep the employer contributions?

Really, I have to say, the fact that the employer gets their contributions back is ridiculous. I mean, I worked hard and contributed to the company over the last 22 months and now I've got nothing in the future for it. I can understand that you shouldn't just get it as an extra pay out but with all the existing worries about pensions for the future this is really something that should be addressed.

Humour Me

Have you received your leaving service options letter from the pensions company yet? The letter will set out what you are entitled to do.

Refund of contributions less tax is always only for your own contributions, this is a Revenue rule for DC/DB pension schemes, so your employer has no control over this. This allows Revenue to clawback some of the tax relief you obtained for your contributions.

Normally your entitlement if leaving employment before 2 years are:
Refund of your own contribution less 20% tax; or
Transfer value to another pension scheme or PRSA.

The transfer value will depend on the scheme vesting period, so you need to dig out your pension scheme documentation. If the vesting period is 2 years, then you lose the right to keep the employer contributions if you leave the pension with less than 2 years pension service, but if the vesting period is less e.g. 1 year, you can keep and transfer the employer contributions with your own to a new pension plan.