Transferring pension ... with a slight twist

[onlyonpaper]

I am been made redundant after 15 years with my current employer. All of this time I have been a member of the company DB pension scheme. As part of the redundancy package the company is boosting the exit values of the pensions by a generous percentage. I already have a new job lined with another employer with a non contribuatory DB persion. In relation to my current pension I understand my option to be:
a/ Use the value realised to purchase a PRSA or PRB.
or
b/ Transfer into the other companies pension.
Option b would appear to be a lot simpler but if I take option b will my new employer (rather than me) get the benefit of the increased exit value of my previous pension?

 

[Conan]

The answer is "it depends".
Clearly transferring into a PRSA (if that's possible - there are some complications around this) or a PRB means that it is independent from your new employer's scheme.
The real issue is what benefits are you getting in the new ? Is the salary similar to the old employment? How many years service will you have with the new employer? If you took a transfer into the new scheme, what credit (additional service) would you get?

Do you not have an option to take a deferred benefit in the current scheme (leave the benefits where they are)?

On the basis that the new employer scheme is also a DB scheme, you would need to find out what benefit the Transfer Value would buy. How many years service? Having accumulated 15 years with your old employer (based on your salary at date of leaving, but indexed going forward at CPI - max 4%), you would need to calculate whether the years of addidional service offered in the new scheme (based on an estimated salary at retirement) would likely exceed the pension accrued to date (but indexed going forward.

On the other hand if you went for the PRSA/PRB, you would need to estimate the likely value at retirement age (based on an assumed growth rate to retirement age) and then calculate whether that might provide better or worse benefits than the benefit earned to date.

Whoever said pensions were simple!

I suggest you get professional advice in order to make a reasonably informed decision.

 

[Guest126]

You should ask your new company what they will do if you decide to transfer in.

Nowadays, most Defined Benefit Schemes will NOT let you buy years with a transfer - it will be invested on a Defined Contribution basis, in this case it may still be a much better (maybe cheaper) bet than a PRB/PRSA.