Messed up with Pension any advice appreciated

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Mommabearof3

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Hi folks have made mistake in so far as my other half had a PRSA for the last 19 years with no occupational pension available then joined a company 4 years ago and happily joined their occupational pension scheme a year later. I naively was unaware that they could not have both. The PRSA is worth approx 250K and the occupational pension pretty derisory.

I am at a lost as to what to do he has tried to contact the trustees to see can he transfer over the PRSA as a lump to the AVIVA one. Tax wise we never claimed any more relief that we were due but when we get the mess sorted out will contact revenue. I am trying to get an appointment with a financial advisor to look at the whole picture in terms of planning for myself and my other half but am kind of up the walls about this. Any advise would be gratefully received. He is 54 with another ten years to add contributions to whatever is the best option. I have instructed Zurich re the PRSA but also increased his work contributions in the mean time.
 
Your post is a bit difficult to understand.
What's the Aviva pension? Your partner's occupational pension?
And the Zurich one is the PRSA?
And the mess/mess up is that they were contributing to both for the last 4 years?
It's not necessarily the case that you can't contribute to an occupational pension scheme and a PRSA at the same time.
On what basis have you concluded that this shouldn't have been possible in this case?
The PRSA guide (attached) on the Pensions Authority website explicitly says:
If I am a member of an occupational pension scheme, can I take out a PRSA?
Yes, a member of an employer-sponsored pension scheme may also take out a PRSA.
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Also bear in mind that merging pensions, where possible, should only be done with full knowledge of all of the implications.
And in some cases keeping pension cover "fragmentated" into different policies and pension classes (occupational v PRSA v personal pension v buy out bond etc.) can offer flexibility.
 

Attachments

  • prsas_-_a_consumer_and_employers_guide.pdf
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So it was an advisor from Zurich where the PRSA for the last 19 years has been held that says we are not allowed to do it. The occupational pension with Aviva has been set up for 3 years this being the 4th one. We are completely amateurs in this field and at 54 the hope was to bang as much as possible in terms of relief for the next 10 years.

i will read the document you have attached now and thank you for taking the time to answer.
 
If I am a member of an occupational pension scheme, can I take out
a PRSA?
Yes, a member of an employer-sponsored pension scheme may also take out a PRSA.

Looking at the document it would appear that he can have both. I suppose my question is why the heck the Zurich guy said he cannot but anyway. My other question is in relation to the TFLS upon reaching retirement age how does that work? Can we still get a transfer value and try and buy an ARF by combining the 2 upon retirement age?

It does not specify in the manual that the PRSA has to be an AFC PRSA if we continue as we are not exceeding tax allowance would there be negative implications do you think?

I am still going to try and get independent advice but it would be great if we could leave it as it. We have been working hard and maxing out our contributions over the last few years. We are average earners with no other income and it gave me an awful fright today when I was told I had to wind up the existing PRSA with no suggestions about where to put the funds.
 
You can be a member of an occupational pension scheme and also arrange a personal pension. However, it may not be possible to claim tax benefits for both. You cannot contribute to an occupational pension scheme and a personal pension arrangement at the same time for the same employment. However, you can make a personal pension arrangement for earnings from another employment or from self-employment.

This was from citizens information so I claimed relief for the last 3 years on all contributions is it the tax relief element that is the issue?
 
I would guess that it's a PRSA (not an AVC PRSA) and that's why Zurich says he can't have both the occupational pension scheme and a PRSA that's for self-employed or non-members of occupational pension schemes.

Did the Zurich Life advisor say he could do anything to help you? Or, did he just say 'Can't do that' and leave it at that?

I don't think you should be in too much bother with Revenue. It's more a case of the designation of the overlapping contributions from PRSA to AVC PRSA.

What other half should have done is taken out an AVC PRSA when he started in the company scheme, then the contributions would be eligible for tax relief in the correct way. I presume Zurich didn't know about the pension scheme until recently?

What's the charging structure in the Aviva group scheme?

Don't panic too much yet.

Gerard

www.prsa.ie
 
Mommabearof3 said:
My other question is in relation to the TFLS upon reaching retirement age how does that work? Can we still get a transfer value and try and buy an ARF by combining the 2 upon retirement age?
Click to expand...
You can have multiple pensions and still benefit to the max from the tax free lump sum on a cumulative basis (e.g. 25% TFLS each time you retire a pension until you hit the €200k ceiling cumulatively). I myself have a PRSA (split into 5 separate policies for various reasons), a personal pension plan and a buy out bond. I'm retiring a small PRSA policy now early (late 50s) while I consider my options and decide whether or not I'm going to go into paid employment again.

There's no necessity to combine pensions into one. And there are potential benefits and additional flexibility from not doing so.
 
The Zurich guy was extremely difficult honestly, i drew attention to it and queried it after reading a post here about an op who was in a similiar position. He knew I was worried and addled and to be honest definitely did not help or help provide options.

I do all the paperwork in our house as my other half is extremely dyslexic we have sent off a few emails to his administrators of the Aviva work scheme to see how it would work out to try to transfer the PRSA into it.

Thanks for the pointer @GSheehy to look into the fees first. It is a PRSA his employment did not have an occupational pension until recently and he only joined not to miss the employers contribution. Never going over the allowable tax relief. Thanks for the reassurance Gerard honestly I thought I was going to have a melt down.
 
Is his employment pension a defined contribution scheme ?

Did he make payments from his employment income into his PRSA after he joined the company scheme ?
 
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Yes it is a defined contribution scheme
Yes he continued making payments into the PRSA after he joined the scheme.
 
Because it's a defined contribution scheme it is treated exactly the same as a PRSA at retirement. 25 % tax free lump sum and the remaining 75% used to buy an Annuity , ARF or withdrawn as taxable income.

There is no discrepancy regarding taxation.
He was entitled to his age related tax allowable yearly pension contributions.
His mix of where the contributions went is his only error.
He has not gained any tax advantage or disadvantage as a result of the error.

Just leave everything as it is, there will be no revenue problems in the future.
If he wants to continue to make AVCs he can open an AVC PRSA.
Keep the existing PRSA, this is totally allowable.

He will be able to combine all these pensions when he retires and then choose his retirement options.
 
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So leave the PRSA where it is just stop making contributions and open a PRSA AVC for future contributions? Do I need to tell revenue anything should I advise them of the situation would you think?
 
S class said:
Because it's a defined contribution scheme it is treated exactly the same as a PRSA at retirement. 25 % tax free lump sum and the remaining 75% used to buy an Annuity , ARF or withdrawn as taxable income.

There is no discrepancy regarding taxation.
He was entitled to his age related tax allowable yearly pension contributions.
His mix of where the contributions went is his only error.
He has not gained any tax advantage or disadvantage as a result of the error.

Just leave everything as it is, there will be no revenue problems in the future.
If he wants to continue to make AVCs he can open an AVC PRSA.
Keep the existing PRSA, this is totally allowable.

He will be able to combine all these pensions when he retires and then choose his retirement options.
Click to expand...
Perhaps going forward it may be an option to make AVC payments directly to his DC pension ?
 
Mommabearof3 said:
So leave the PRSA where it is just stop making contributions and open a PRSA AVC for future contributions? Do I need to tell revenue anything should I advise them of the situation would you think?
Click to expand...
Yes.
As stated above he could also make AVCs directly to his employment scheme if he prefers. Although making them to a separate AVC PRSA can be a good idea if he doesn't want the employer to be aware that he can afford to make extra pension payments.

I made a similar mistake many years ago. No problems arose. Revenue will not have any input into this situation because all your income tax affairs are in order.
If it was me, I would just leave it as is. Why complicate things.
 
Thanks everybody for all the input could I just ask one other question if the PRSA is now closed off would we be better trying to get it moved into the occupation defined contribution scheme or just leave it? It was set up as execution only years ago to try to have some type of fund but I wondered how it will be managed going forward in terms of fees and growth?
 
Mommabearof3 said:
Thanks everybody for all the input could I just ask one other question if the PRSA is now closed off would we be better trying to get it moved into the occupation defined contribution scheme or just leave it? It was set up as execution only years ago to try to have some type of fund but I wondered how it will be managed going forward in terms of fees and growth?
Click to expand...
I'm not sure if you can merge a PRSA into an occupational scheme?

Even if you can then whether or not it's a good idea really depends on things like the charges, investment options, the timeline for (early) access etc. with the different pensions.

As I've said already, there's no problem with having multiple pensions and, in some cases, it can actually be beneficial from a charges and flexibility point of view.

Edit: oh, you can. But whether you should is a different question.

Transfer of benefits - pensionsauthority

Pension arrangements generally allow you to transfer your pension benefits from one arrangement to another. The transfer rules depend on the arrangement you are transferring from and the arrangement you are transferring to.
pensionsauthority.ie pensionsauthority.ie
Benefits from a PRSA can be transferred to another PRSA, to an occupational pension scheme or to an overseas arrangement.
Click to expand...
 
S class said:
I would say keep it separate.
It will operate exactly the same whether payments continue to be made into it or not.
Have a look at the charges and then check out the execution only brokers who post on AAM and see if they offer lower charges.
Click to expand...

What happens to the Zurich fund when it is closed does still accrue growth without any premiums?
 
Mommabearof3 said:
What happens to the Zurich fund when it is closed does still accrue growth without any premiums?
Click to expand...
Yes. Fund(s) invested in will continue to go up and down, exactly the same as when premiums were being paid.

Main thing to look out for is charges and fund options & performance.
 
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