In this era of career mobility, you may change jobs many times during your lifetime. If each job has its own Occupational Pension Scheme, this can mean you end up at retirement with lots of pension funds accumulated in lots of schemes. This is not ideal for several reasons. (1) The scheme Trustee(s) must sign off any requests to withdraw or transfer your benefits, either at or before retirement. So you need to keep track of the Trustee of each scheme until you retire. This may prove difficult if, for example, your former employer winds up operations or is sold before you retire. (2) You may not be aware of what fund(s) each of your retained pension benefits is invested in, or what the ongoing charges are. (3) You have little or no control over the investment choices, even though eventually you will be the sole beneficiary of these funds.
One way of avoiding the above situation is to keep “bringing your funds with you”, i.e. transferring your accumulated funds from one Occupational Pension Scheme to the next. However, this may not always be possible. If your current employer only offers a PRSA, there are restrictions placed on transferring from an Occupational Pension Scheme to a PRSA. Or if you become self-employed, you cannot transfer funds from an Occupational Pension Scheme to a Personal Pension Plan.
Another potential solution is a Personal Retirement Bond or Buy Out Bond. A Buy Out Bond is a lump sum pension policy, chosen by you, into which an existing fund can be transferred from an Occupational Pension Scheme. You choose the fund manager and you choose the fund – Managed Funds, Equity Funds, Index-Tracking Equity Funds are all available. Self-directed Buy Out Bonds are also available, allowing you to choose your own shares or even buy a property if the fund is large enough. Once the Trustee of the Occupational Pension Scheme has arranged for your fund to be transferred into your chosen Buy Out Bond, you then have full control over your fund and the scheme Trustee has no further connection with it.
One note of caution – if you have retained benefits in a Defined Benefit pension scheme, with a guaranteed pension at retirement, it may not be advisable to forfeit these valuable guarantees in order to transfer to a Buy Out Bond.
Click here to download our free Buy Out Bond Frequently Asked Questions leaflet.
Click here for more information on our range of Buy Out Bonds.