Changing Jobs? Don’t leave your pension behind!
Posted by Nick Lawlor on November 25 2013 @ 12:11
30 and 40 years ago the most sought after job in the country was a permanent pensionable job for life. Usually in the public sector as a “job for life” was simply unattainable elsewhere. Guaranteed wages, guaranteed pension. Why not? But times have changed. With the influx of overseas companies and the growth in exports and Irish based companies the variety of job types and employers in Ireland has grown exponentially. IT and Pharmaceutical operations exploded in Ireland. Job security seemed assured and the tendency to move from one company to another became much more common. In fact it became the norm to move jobs numerous times throughout the course of a person’s career. While this has slowed in recent years due to the lack of job opportunities in Ireland, the reality for many is that they have been forced to change careers due to redundancies and company closures or have moved employers voluntarily. So why am I bring all this up?
Individuals have a full career. Normally 40 years or so long. That career must not only pay for the 40 years you are working but for the 20 + years after you retire. Now before you think I am about to tell you of the importance of saving for retirement, stick with me. Of course it’s important and I’ll never stop telling clients that but what happens if you spend 10 years working in 1 place, 2 years in another, 4 in another and so on. What happens the pension payments you made in the company you used to work in. If you are like most people, if you have changed employers, you will have received a “leaver options form”. Not knowing what to do and too busy with your new job or indeed searching for a new job you left your pension entitlements in the hands of your old employer. Not always the wisest of moves.
Pension’s law in Ireland allows you to take control of your money instead of leaving it in the hands of your old employer in whats known as a Buy Out Bond (BOB) or Personal Retirement Bond (PRB). Leaving your accumulated fund with a previous employer, you will have to contact the schemes trustees to access it at retirement. This could of course prove problematic if the company is no longer there leaving you with the problem of having to start the search for where your fund might actually be? Not only that but you will be handing over full control of the investment choice and the risks taken with your retirement fund to someone else. By transferring your accumulated fund into a BOB you will regain full control of your fund and in doing so also take control of the charges, the risks and the retirement age.
Some individuals will transfer their old employer pension to their new employment but this is not always the way to go either. The rules of your new scheme would then apply which are usually not as favourable as the older schemes. Most older schemes will have a retirement age of 60 and newer schemes 65.
The BOB has become much more popular for a variety of reasons. It removes the need to stay in touch with your previous employer. You will receive all correspondence and you will have total control of your fund. The rules of the old scheme will still apply but now you control the money. Importantly, a BOB will also in some circumstances allow for access to funds from the age of 50 without actually retiring.
Pensions are complicated and it is fair to say in some cases it may be more beneficial to leave your money in the old employer fund of the old scheme offers certain benefits. Advice here is crucial. There are many scenarios and very many rules to navigate. But in summary, if you have changed jobs and left your pension behind, not only can you more than likely save money but regain full control of your money too.
Nick Lawlor is the owner of Lawlor Financial Planning and is one of only a small number of Certified Financial Planners or CFP®’s operating in Ireland and is based in Keeper’s Cottage in Leixlip. Contact firstname.lastname@example.org or 0863161232 for a complimentary consultation. Nick Lawlor Financial Planning Ltd trading as Lawlor Financial Planning and Simplysave is regulated by the Central Bank of Ireland. Lawlor Financial Planning does not take responsibility for individual financial decisions made based on this article.