With so many redundancies of late, it has become more important than ever to know your pension benefits. Many companies in Ireland have announced a massive cut of jobs, so this really brings home the need to completely understand what your Pension Benefits are and how you can protect, preserve and grow a pension, especially once your employment has ceased.
If you are a past member of a defined benefit pension scheme who has not reached retirement, you are known as a deferred member. As deferred members, you now have the option of leaving the deferred benefit in the defined benefit scheme until retirement or transferring the value into a policy in your own name.
Leaving service means that you automatically become entitled to a preserved benefit provided you have been a member of the scheme for at least two years. When an employee becomes entitled to a statutory preserved benefit in an occupational pension scheme, they will have the following options:
- Retain the preserved benefit in the scheme until drawn on at retirement or
- Make a transfer value payment to
- another funded occupation scheme which provides retirement benefits
- a personal retirement bond
There are some key details that you need to be aware of to help identify your best course of action, such as:
- What is the Projected Income benefit in retirement?
- What age are benefits paid?
- Spousal Benefit – Is your spouse entitled to a reduced pension or indeed any pension at all?
- Death Benefits – What happens if you die?
- What is the transfer value?
There is a risk that if you leave the deferred benefit in the scheme, you may not get the full pension promised. The main risk is that one or more of the following things will happen:
- The trustees could reduce the deferred pension before you reach the retirement age.
- The trustees could reduce the pension payment after retirement age.
- The scheme could wind up with a deficit either before or after your retirement age.
Deferred and active members are particularly exposed in the event of a windup. If there are not enough assets to go all the way down the line, then available transfer values could be reduced by 50%. In certain circumstances, it could be even lower.
There is a risk that the employer will not have the financial commitment and or capability to fully fund the scheme on a long-term basis.
How far away from retirement age you are, and how many other scheme members who will become pensioners before you do, means that the further down the queue you are, the higher the risk of not getting the full deferred pension promised.
To be in a position to make an informed decision, you need to have answers to some of the key questions. You can contact us to discuss your options. Don’t leave it too late.