New here, and some of the other posts have given me some pointers on Buy Out Bonds.
I am in a company pension scheme, fund is worth 260 k at the moment, 17 years service, and for various complicated reasons I am considering leaving the job in the coming months, so this would not be a redundancy situation.
Salary 58,500, and in the scheme for 16 years. Current age 45.
Have been looking at the various Buy Out Bond options, and need clarification on a few items.
Are these statements correct.
Would I be eligible to transfer into a buy out bond and take benefits as early as 50 years old. One can drawn down as early as 50 years old, may not advisable but checking the facts.
What is the maximum tax free lump sum payment that I could take, based on the above, that can be taken at aged 50. Assuming fund value 260k.
What would the estimate be on the ongoing pension amount after drawdown at 50.(assuing max tax free lump sum taken).
Tips on transfer charges and ongoing management fees and other charges, I understand there is an exit charge if one has the buy out bond less than 5 years, and activates it, within the chargeable period.
............................................................................................Vincent, they were some of the best written and helpful answers I have seen in a while.
The equivalent Euro annuity numbers as per your 3 scenarios would be;
option 1 8026 p.a
option 2 7144 p.a
option 3 4232 p.a
These assume that there is no guaranteed period for the annuity and that your partner is the same age. The inflation hedge is effectively a longevity issue and you are correct to look at it. In our calcs you will be 85 before the inflation option adds more value. Like any type of insurance it does add secuity though.
The annuity rates will improve the older you are when you take out the annuity, so if you say there may be additional work available then if possible hold off on buying the annuity until required.
If I were you I would look into the Approved Retirement Fund (ARF) options and see if it is available to you. if you do not have the ARF option then your tax free lump sum is not based on 25% of the fund but is based on service which could lead to a higher or lower tax free cash amount. If you have the ARF option then at least you can choose the better/more suitable of the two options
Once you have made your decision/plan then we suggets you focus on the following;
1) getting best value Buy out Bond
2) deciding what investment strategy/approach makes the most sense for your preferences and in particular avoiding any large drops in value which would then result in a lower annuity pension
3) when you come to purchase the annuity- shop around as the rates offerred vary significantly
Regards Vincent
fayf;
Based on the info you have provided, if you select the annuity option your tax free cash amount would currently be €65.8k and 25% of the fund (if you select an ARF) would be €65k - i.e no difference. However if your Buy out Bond grows as indicated above then at 50 the tax free cash amount with the ARF option would be €80.6k and at age 60 €119.4k ( assuming no changes to pension tax free rules). The tax free amount under the annuity option would be unchanged unless there were changes to your length of service or salary. The difference is material enough to warrant you taking time to have a good look at the ARF vs Annuity option.
Re shopping around re the providers a good adviser/broker is probably the best starting place. Different advisers have diferent ways of operating, there are good threads here on how to find an adviser and what questions to ask. You will also see advisers here posting on various threads and you can guage from their input whether or not they seem well placed to add value to you or not. Ask a few firms and guage who offers the best combination of value and service.
Regards Vincent
Also worth bearing in mind that fund annual management charges tend to vary depending on the fund type. So Cash Funds have lower charges than say Equity Funds and multi-manager funds tend to cost more than a single manager fund.
You either need to do research as to what structure will suit you best or employ a Pensions Consultant.
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