Transfer to bond or PRSA - I'm a teacher

D

dbyrne

Guest
I know this q has been asked a lot but here are my particular circumstances.

A company I worked for for 15 years was wound down and the defined benefit pension scheme I was part of wound down with it. The transfer value of my pension seems okay. Now the trustees are finalising where the ex-employees money is going and I have to decide what to do with my pension.

I went back to college, did a HDip and hope to get an incremental post in my school in a couple of years - that'll mean that I'll start a new pension.

In the meantime I have a few years without a pension - not a big deal I think.

If I transfer my money into a new PRSA can I keep this and contribute to it even when I am being paid by the dept of education in future? I mention that I'm a teacher in the Title of this post, because I've heard that this makes a difference.

Is a pension bond a dead loss or is it a reasonable investment? Are there any better performing bonds out there?
 
dbyrne said:
I went back to college, did a HDip and hope to get an incremental post in my school in a couple of years - that'll mean that I'll start a new pension.
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If I understand this correctly, you are currently teaching in a secondary school - without an incremental post - and are not a member of the Department's superannuation scheme. Why haven't you joined? You do not have to be an incremental post holder to join...indeed you don't even have to be paid by the Department. Ring the superannuation section in the Department to check.

As for the question of can you run a PRSA alongside membership of the superannuation scheme - the answer is an unequivocal yes. The only issue is how big a fund might you be allowed accumulate. The following may be relevant:

1) The Revenue maximum allowed pension is 2/3 of salary at retirement. The teachers' superannuation scheme provides for a maximum of 40/80ths pension and 120/80ths lump sum. However, the Revenue now accepts that a lump sum of 150% is not the equivalent of a pension of 16.7% (the difference between the superannuation 50% and Revenue permitted 66.7% which the Revenue used to hold was fully funded by the 150% lump sum at a ratio of 1:9 whereas now one hears that they are prepared to allow a ratio of up to 1:12 due to the decline in long term interest rates). Therefore, there is scope to fund extra pension above the superannuation maximum.

2) Since the superannuation pension is "integrated" (i.e. the old age contributory pension is not paid seperately to you above the superannuation one) there is scope for you to fund an additional pension of equal magnitude to the OACP and still stay within the Revenue limit of 2/3 final salary plus OACP.

3) Superannuation pays a reduced spouses' and children's pension on death of the member (eg. your spouse would see an immediate 50% fall in income on your death in retirement). Revenue allows up to 100% of pension to be paid to the surviving spouse. This cover can be funded seperately.

So you can see that there is considerable scope for the PRSA (AVC) you mention. But please promise us all one thing - you will use a fee-based broker and stay out of the clutches of Cornmarket.

Why? Have a look around the related threads in this area. (Hint - you'll save yourself a fortune in fees and commission.)
 
Just referring back to the question - there is no real difference between Retirement Bond and PRSA - but you can contribute to the PRSA the Retirement Bond is really just a place that you can transfer money from a previous pension scheme, for this reason I would be inclined to go for the PRSA, but try to choose a good (suitable for you) PRSA provider.
 
from ASTI:
[FONT=Arial, Helvetica, sans-serif][FONT=Arial, Helvetica, sans-serif]How do I join the teacher' superannuation scheme?
Membership of the scheme is compulsory for all permanent and temporary Department paid teachers. Teachers should apply to: Department of Education and Science, Pensions Section, Athlone, Co. Westmeath. Department paid teachers are eligible to apply for membership, however part time teachers must be teaching a minimum of nine hours per week for a full school year. Teachers also have the option of buying back pension credit for previous years of actual teaching service. [/FONT][FONT=Arial, Helvetica, sans-serif] [broken link removed]
For more information on the buy back scheme read ASTI leaflet [broken link removed] and the [broken link removed].[/FONT][/FONT]
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In addition to contacting the department I would contact the relevant Trade Union (ASTI /TUI) as well. (but be aware of what Oysterman says above).

This is a long shot... but if your old company was a commercial semi state organisation it might be part of a "knock for knock" arrangement which exists within the public sector.


[FONT=Arial, Helvetica, sans-serif] [/FONT]
 
I just checked in to see if there were any replies to my post and I'm blown away by the calibre of the responses. Thanks so much to everyone who has taken time to help me - I will follow up on all the leads, esp joining the depts superannuation scheme.
It's funny, as soon as I mentioned my situation in the staff-room, the name cornmarket came up. I promise to steer clear.
 
In the long run if you want the right and best advice and you want to make the most of your money, go to where the unions advise, because at the end of the day they are the only brokers who have the expertise when it comes to this area. If you go to a fee-based broker and ask him about the rules of superannuation and every thing that goes with it they will more than likely refer you back to marsh or cornmarket, because they simply don't have the expertise.

you get what you pay for!!
 
sunshine? said:
In the long run if you want the right and best advice and you want to make the most of your money, go to where the unions advise
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Are you sure about that? Why would the unions be in a position to know what's most appropriate for an individual in this context?
 
The whole area of superannuation/pensions for individual groups within the public sector is very complex, as a result various brokers are specifically appointed to each group because of the varying complexities involved. Each broker builds up a knowlege base (which can take years) before entering such a market.

Small brokers sell off-the-shelf products with very little expertise in these areas.

In this particular case the wrong advice (or an off-the-shelf pension) could mean this teacher would have to buy an annuity with her fund as opposed to having the flexibility of putting it into an Approved Retirement Fund (ARF), or she could end up over funding and drawing it down at the high rate of tax - resulting in no tax benefits. And so on.

The benefit to the union members is best advice.
 
sunshine? said:
Small brokers sell off-the-shelf products with very little expertise in these areas.

In this particular case the wrong advice (or an off-the-shelf pension) could mean this teacher would have to buy an annuity with her fund as opposed to having the flexibility of putting it into an Approved Retirement Fund (ARF), or she could end up over funding and drawing it down at the high rate of tax - resulting in no tax benefits. And so on.

The benefit to the union members is best advice.
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Hi sunshine

God I go away for a weekend to France and come back to see outrageous posts like this :)

I strongly refute your assertions here:

  1. I work for a non-multinational brokerage, we specialise in 'non off the shelf' products, in fact 'off the shelf' stuff is more likely to come from multiples (think McDonalds vs Restaurant), the smaller advisors are in a position to adapt advice to individual's circumstances.
  2. The advice given by a broker cannot impact whether somebody's AVC money will be taken as an ARF or as an annuity, this is determined by revenue's rules and there is noting that I or Marsh/Cornmarket could do that would mean my client could not take an ARF while their client could (all other things being equal).
  3. Overfunding is a most unlikely scenario for most pension fund investors nowadays - particularly in this environment of lighter mortality rates and MOST IMPORTANTLY low interest rates.
  4. I think you can see from all the negative posts about the Teacher AVC scheme that your reference to "best advice" seems unfounded.
 
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