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If you are a deferred member of an occupational pension scheme, it may be worth assessing your options. Whether that be to remain in the scheme or leave.
Transfer Values regarding Occupational Pension Schemes have gained media attention as of late.
Defined Benefit (DB) schemes in particular have seen a severe decline in recent times.
A recent Irish Times report illustrated such decline of these schemes across Ireland.
DB schemes fell from over 2,500 in the 1990s to just over 600 in 2020.
Several factors have placed a burden on these schemes and the liabilities are outweighing assets in many cases.
Every situation is different and should be judged on a case-by-case basis.
We have gathered information and broken it down below for you. If you would like to speak to an expert and assess your options, click here.
Table of Contents
What is a pension transfer?
Dependant on the scheme you are in and the rules surrounding the scheme, you may be eligible for a pension transfer.
However, it always worth consulting with a Qualified Financial Advisor before making any decisions.
Depending on your situation, there may be pros and cons to various options.
If you satisfy the scheme rules, many occupational pension schemes offer deferred members the opportunity to transfer.
For example, if you are in a DB scheme and satisfy the conditions, you could potentially transfer to a Buy-Out-Bond. This is also known as a PRB and will you more control over your investment decisions.
You may also be eligible for a 25% tax-free lump sum.
What is an Enhanced Transfer Value (ETV)?
An Enhanced Transfer Value (ETV) is offered to members as a once-off opportunity to transfer the value of their pension fund. This is on enhanced terms, meaning the monetary amount offered may be increased as an incentive. The member has the option to agree to this amount and transfer their pension arrangement. Furthermore, the ETV exercise grants the company and trustees an opportunity to de-risk the current pension scheme.
Taking an enhanced transfer value
You could be eligible for an enhanced transfer value if you: –
- Are a current employee where the scheme has ceased to accrue future service
- Are a deferred member – i.e., a former employee who is not in receipt of benefits.
Employers may offer current employees the opportunity to transfer to a defined
Whereas deferred members may have the ability to transfer to a separate arrangement. For example, a Buy-Out-Bond.
To make the above transfer option more attractive to deferred members, this is where an ETV may be offered.
Below is an example of Defined Benefit transfers along with ETVs
3 potential reasons to transfer your pension
Enhanced Transfer Value (ETV) is offered to members as a once-off opportunity to transfer their pension. This is on enhanced terms, meaning the monetary amount offered may be increased as an incentive. The member has the option to agree to this amount and transfer their pension arrangement.
As of late, many employers running DB schemes are offering Enhanced Transfer Values to deferred members.
We have illustrated below how an Enhanced Transfer Value may work : –
Flexibility – If you transfer out of your occupational pension scheme to a PRB you will gain full control. This will in turn give you flexibility with your investment fund choices.
Tax-free cash – On transfer, you may be eligible to access 25% of your fund tax-free. This will be dependant on your situation and scheme rules.
Inheritance – Many people will base their decision on who may be left behind on their death. Again, each decision should be made on an individual basis and will be scheme dependant.
3 potential reasons not to transfer your pension
Certainty – An advantage of a DB pension is that you know you will get a certain amount for the rest of your life.
Investment Strategy – DB schemes are generally invested in a wide range of assets to reduce risk. These include a mixture of shares, bonds, property, infrastructure assets and commodities.
Future Planning – Having a specified amount of income in retirement may allow for more concrete financial planning.
Frequently Asked Questions FAQ's - Defined Benefit Schemes
Click the below links for more detailed information.
How do I speak to an advisor to assess my options?
The easiest way to begin assessing your options is by contacting our team.
Our advisors are industry experts and will only allow you to transfer if it is the right decision for your situation. A holistic approach must be taken when discussing such decisions.
If you would like a free no-obligation chat please leave your information in the contact box or give us a call.
Call us: 01 890 3518
Discuss Your Options
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