F
Fenian
Guest
I have a deferred pension with a previous employer some of which was funded via AVC. Does this just sit there or can I actively manage myself -instead of simply transferring to my new occupational scheme.
I have a deferred pension with a previous employer some of which was funded via AVC. Does this just sit there or can I actively manage myself -instead of simply transferring to my new occupational scheme.
Don't know if I'd share your understanding of DBs and DCs LDFerguson, there is nothing guaranteed about a DB, just ask the workers of Waterford Crystal! A DB is a promise of a pension rather than a guarantee. Also Defined contribution refers to the fact that your eventual benefits are defined by the level of contribution you have made. In other words the more you invest the more you're likely to get back. But with the later the money is yours, invested in asset classes chosen by you and so long as there is a value to your investments, you are guaranteed a pension at retirement, however big or small it might be.
In fact it is the DB's that are dependant on your employer keeping the scheme well funded in order that there will be sufficient resourses to pay your pension on retirement.
Also AVCs are DC and the short answer to yur query is yes. Usually there is plenty of scope for chosing your own asset classes. Unless you have chosen a default stratagy from the outset, whereby the money is automatically invested in managed funds and as you approch retirement, the money is moved into more secure asset classes. Talk to the insurance provider or better still an Authorised Advisor.
Patrick
In a D.C Scheme the pension is yours from the begining, you own the funds building up in it. You can transfer, fund switch and control them, and the benefits are yours, guaranteed.
Afraid not pj111. The assets in a DC Scheme are owned by the Trustees. There is absolutely NO guarantee of the level of benefits you receive at retirement. The amount of pension you will receive will be based on contributions paid, fund performance and annuity rates at that time.
And you do receive a guarantee with a DB scheme. If the scheme cannot honour the guarantee, that's a separate issue entirely.
The assets in an occupational pension scheme are not owned by the scheme trustees.
An individual or a company which alone or jointly becomes the legal owner of property to be administered for the benefit of someone else (the beneficiaries), in accordance with the provisions of the document creating the trust and the provisions of trust law generally and the Pensions Act.
Firstly I think it best to answer Fenian’s initial question. After that I will try to address the Boaber and LDF posts.
1) Your options are going to depend on whether or not you have at least 2 years service in the scheme for retirement benefits.
If you have less than 2 years, your options will be solely dictated by the rules of the scheme. Where the scheme provides full vested rights, you are entitled to preserved or paid up retirement benefit related to the period of service completed. So in your case (defined contribution) the benefit would be the value of contributions paid to the scheme by yourself or on your behalf during your period of membership of the scheme. Some schemes however may only provide scaled or proportionate vested rights in relation to benefits secured by your employer, contributions (if there were any). For example no rights if less than a year, 50% rights if between 1 and 2 years service.
You can leave the benefits in the scheme or the trustee may be able to pay a transfer in lieu of the preserved benefit.
You may have the option to transfer value of equivalent actuarial value to the preserved benefit, paid in lieu of the preserved benefit to either
a) An occupational pension scheme
b) A buy out bond or
c) PRSA
You may also be able to take a refund of your contributions to the scheme or your AVC. However if you did do this you may lose any benefits paid by the employer and the contributions would be subject to a deduction of tax. Or you could transfer these into a PRSA and avoid the tax deduction.
2) If you leave employment with more than 2 years of service in a DC scheme for retirement benefits, the preserved benefits are the benefits secured by all contributions paid by your employer and yourself. So again, you can take them in the same manner as above but you can only transfer into a PRSA if you have less than 15 years in the scheme.
3) A transfer to a PRSA or a Buy Out Bond will allow you to manage your money and decide what funds you wish to invest in, within the range of fund options offered by the provider you choose. The portion of your contributions that are currently in your AVC can be managed by you at anytime.
4) However there are a number of issues you need to consider when deciding whether or not to you want to maintain your preserved benefits or transfer to another pension arrangement. For this I suggest you get advice.
Patrick
Source:For example, in a trust based occupational pension scheme, the Official Assignee cannot gain access to the funds since the trustee (not the bankrupt member) is the legal owner of the assets in the trust.
Source: [broken link removed]The trustee’s role is to oversee the pension scheme. They are required to act prudently and in the best financial interest of the beneficiaries. The trustee is also the legal owner of the assets.
Source: [broken link removed]The PRSA contributor is the owner of the PRSA assets – unlike an occupational pension scheme, where the trustee is the legal owner
Source: [broken link removed]ASSETS
The property, investments, cash and other items of which the trustees of a pension scheme are the legal owners.
Therefore I feel the use of the word guaratee [sic] is a bit cavalier when offering advise [sic] on this topic.
The reason I would not use the term guarantee and prefer to use the word promise...