Defined Benefit Vs PRSA

D

daragh_k

Guest
Hi all this is my first post so go easy on me !!! Im looking for some advice, I have recently been made reduntant and left with a descent lump sum and my pension is currently held in a defined benefit plan. I was told at the time I would be crazy to move the pension which is around 6.5K per annum plus a small lump sum in 30 years time on retirement, As its suppose to be a very safe plan!!!

I have recently had advice to the contrary from a finace agent saying Id be crazy not to take control of it myself as im less than 15 yrs in a pension and move it to a PRSA.

Have any of you got an input here??

Thanks
 
Be very careful.

By any chance, is this "finance agent" trying to sell you a PRSA, for which s/he will receive commission?

A solvent Defined Benefit scheme is very valuable as you are guaranteed to get the promised pension, regardless of investment conditions in the future.

Transferring from a Defined Benefit Scheme to a PRSA should only be done in a very limited set of circumstances and after careful examination of both sides. Here's a few examples - do any of them apply to you?

  • If the Defined Benefit scheme is insolvent, it may not be able to provide the guaranteed pension promised.
  • If the transfer value quoted is so high that you could transfer into a low-risk PRSA and still get a higher pension. (Very rare in the current climate.)
  • If the flexibility of an Approved Retirement Fund at retirement is of huge importance to you, to the point that you're willing to forfeit Defined Benefit scheme guarantees to get it.
I's suggest you ask the finance agent to provide you with a list of reasons why s/he would recommend that you transfer from the Defined Benefit scheme to a PRSA, and a list of possible downsides. I'd love to see the reply.

Liam D. Ferguson
 
LDFerguson said:
Be very careful.

By any chance, is this "finance agent" trying to sell you a PRSA, for which s/he will receive commission?

A solvent Defined Benefit scheme is very valuable as you are guaranteed to get the promised pension, regardless of investment conditions in the future.

Transferring from a Defined Benefit Scheme to a PRSA should only be done in a very limited set of circumstances and after careful examination of both sides. Here's a few examples - do any of them apply to you?

  • If the Defined Benefit scheme is insolvent, it may not be able to provide the guaranteed pension promised.
  • If the transfer value quoted is so high that you could transfer into a low-risk PRSA and still get a higher pension. (Very rare in the current climate.)
  • If the flexibility of an Approved Retirement Fund at retirement is of huge importance to you, to the point that you're willing to forfeit Defined Benefit scheme guarantees to get it.
I's suggest you ask the finance agent to provide you with a list of reasons why s/he would recommend that you transfer from the Defined Benefit scheme to a PRSA, and a list of possible downsides. I'd love to see the reply.

Liam D. Ferguson
Click to expand...

Hi Liam and thank you very much for your input. Yes I presume there would be some commission involved for the agent here which always makes me a bit wary. However just to answer one or two of your points below as they were pointed out to me...And I could be totally wrong here!!

  • The defined benefit scheme is currently very safe and solvent but 33yrs is a long time away and if this company were to pull out of Ireland in the morning would this be cause for concern ??
  • The transfer value of the scheme is 27k. Im not sure what growth rate can be got on this in a PRSA but if you take an average 5% over 33 yrs this would work out considerably better than the value of the current scheme.
 
Don't leave your Defined Benefit = first position. Then look for very good reasons to change your mind. If necessary get a fee based consultation from a Fin Adv.
;)
 
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Hi

Normally when you are transfering over €10,000 out of company scheme and into a PRSA you have to get a certificate of benefit Comparison this can cost you up to €500. Personnally i would be happy to stay with the D/D Scheme as PRSA is not guaranteed to match or beat benefits you will get.

Regaards

John
 
I would say that your probably best off with the DB scheme if your fairly sure the employer will still be in Ireland/Existence when you retire.
Otherwise its definitely worth looking at a transfer. As above, reccomend a fee based
consultation!
 
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