Pension Transfer (DB)

[Nodrog2007]

I've received a letter, offering me a transfer amount of €149k from a DB with a previous job, this includes a *one time enhancement* of 35k

My DB pension will give €7500pa from age 60 (I'm currently 53).

How do I decide what to do?
I've a PRSA with approx €150k, no mortgage, no dependents, no loans and around €150k in savings.

 

[Bank Manager]

this may help you in your decision...

Should I transfer my Defined Benefit Pension? [2024] - National Pension Helpline

Companies who have a Defined Benefit (DB) pension scheme often offer a transfer value to employees who have left service in lieu of a deferred guaranteed pension.

nationalpensionhelpline.ie

 

[ClubMan]

National Pension Helpline is not an official government site even though it (in my opinion) is crafted to look as if it is.
This sort of seeming subterfuge really bothers me.

Unofficial Pension Fund Comparison Tool Launched

 

[JoeRoberts]

You are not far out from retirement so the offer is fairly decent value and then it depends on other factors such as tax position and other incomes.

 

[GSheehy]

My DB pension will give €7500pa from age 60

Yes, but that's not the full picture. What's the frequency of payment? Is it in advance or arrears? What's the guaranteed period? Does it increase annually?

When you know those, you could do a comparison annuity quote.

It does seem like a fair transfer value though.

 

[Dave Vanian]

Another thing to consider is how financially stable the DB scheme is. The pension of €7,500 per year from the DB scheme is only as secure as the scheme's ability to pay it for the rest of your life. If the scheme is financially sound and backed by an equally financially sound employer, then the pension is probably safe enough. If not, it's an argument in favour of taking the transfer value.

 

[conor_mc]

There’s probably a question of whether it’s worth it for your personal circumstances too. If you have the security of a full COAP of €15k pa from age 66 and no dependents, you might enjoy the 149k sooner (travel, etc.) rather than the drip-feed of 7.5k pa.

 

[Steven Barrett]

A quick quote for a single life annuity paying €7,500, no indexation shows it will cost €148,400. If there's indexation of 2%, that will cost €194k.

Add in a spouses pension of 50% and the cost for a level pension is €159k. If it is indexed linked, it costs €211k.

They are the hurdles you have to clear to be better off by taking the transfer value. You are assuming the risk, so you may do better or you may do worse. annuity rates will change by the time you access the fund or you may opt for an ARF.

You should also check the funding levels of the scheme.

Proceed with caution. Your starting point should be to stay with the DB scheme. There is no going back once you take the transfer value.