Personal Retirement Bond (PRB)

by | Nov 4, 2020 | Financial Tips

Personal Retirement Bond / Buy Out Bond

These days, jobs are often no longer for life which means that most clients have pensions from previous jobs scattered around which they do not have a full handle on, with most being left idle without proper management. These pensions should be an integral part of your overall financial plan, and should all be working in unison to achieve your retirement goals.

 

What is a Personal Retirement Bond?

A Personal Retirement Bond (also known as a Buy Out Bond) is an individual pension bond established in your name. You can transfer your pension benefits into the bond if you leave a company pension behind or if your company pension scheme is shut down which gives you control of how these funds are invested.

 

Five Good Reasons to invest in a Personal Retirement Bond

  1. The policy is issued in your name and belongs to you.
  2. Your previous employer and the Pension Trustee(s) have no further involvement.
  3. You choose the fund in which your money is invested.
  4. You can choose when you take your benefits. This can be any time from the earliest date retirement was allowed under your company pension scheme. You can choose to take the benefits as late as age 70 even if you are still working to that age.
  5. Your PRB will be invested in a fund(s) that is currently exempt from tax on investment income, and capital gains tax, so that you gain from all the growth and income that your fund earns.

 

How does it work?

  • Your transfer value amount is transferred from your pension scheme into a PRB.
  • The money is invested in a fund chosen by you – or, if you make no choice, in the PRB’s default fund.
  • No new contributions can be made to the PRB.
  • The value of your PRB will rise or fall depending on fund performance.
  • At retirement, you will be able to take your benefits from the PRB. Options may include a Retirement Lump Sum, an income for life (annuity), a taxable lump sum and an Approved Retirement Fund.

 

When can you access your funds?

From the age of 50, you will be able to take early retirement benefits from your PRB. Note that the earlier you take your benefits, the lower your annual retirement income or lump sum benefits are likely to be.

 

What if I already have a PRB from a previous job? 

Even if you have already placed your pension funds into a PRB with a pension company these can always be moved between companies. The benefit of this is to ensure that your funds are invested properly and take advantage of growth within different funds.

 

To consolidate or to not consolidate your pension contracts? 

One of the most common questions I am asked by prospective clients is: “should I consolidate my pension contracts?”. On the face of it, it seems obvious that you should combine your various pension arrangements in one place as it is tidier and there is only one company or provider to deal with. However, a recommendation to consolidate is often more complicated and should factor in your specific personal and financial circumstances. Increasingly we see that having two to three pension contracts can provide clients with additional flexibility when it comes to retirement, and consolidating contracts can sometimes mean losing that flexibility. Having multiple pension contracts shouldn’t mean that your investment strategy isn’t a coordinated one, your pension contracts should talk to each other and essentially work in unison in order to best achieve your retirement goals.

 

What happens if you die before taking retirement benefits under the PRB?

If you die before you retire, the value of your PRB will be paid to your estate. As with any inheritance, your beneficiary may have to pay inheritance tax on any benefits.

 

I have been awarded a Pension Adjustment Order as part of my divorce – What can I do?

Increasingly we are seeing more and more pension adjustment orders issued. This is issued to one spouse over their former spouse’s pension as part of the divorce process. A transfer may also be accepted into a PRB from a company scheme, PRSA, or Retirement Annuity contract as a result of that Pension Adjustment Order (PAO). This is for many a simple way of hiving off their benefits from the main scheme and protecting their portion of the pension pot.

 

Oaktree Financial Services can work with you to review your pension arrangements and formulate a cohesive retirement and investment strategy. We understand that retirement can mean different things to different people and have a range of pension solutions to suit your individual pension needs.

Don’t hesitate to book a chat here, or call 025-30588.

 

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Disclaimer

Oaktree Financial Services Ltd is regulated by the Central Bank of Ireland.

All content provided in these blog posts is intended for information purposes only and should not be interpreted as financial advice. You should always engage the services of a fully qualified financial adviser before entering any financial contract. Oaktree Financial Services Ltd will not be held responsible for any actions taken as a result of reading these blog posts.

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