Do you have more than one pension?

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When I am carrying out a financial review with people, I look at all of their finances and quite often there are areas that require further research. One such area is tracking a person’s pension / pensions from older employments.

What I am finding is that people may have forgotten details or don’t have much knowledge about these older pensions. So, I can help them obtain details such as where the policy is being held, what their current options are and making sure that they are clear on the pros/cons of what they can do.

Questions that arise:

  •   Can / should I encash it ?

  •   Can / should I move it ?

  •   Do I lose out by doing anything with it ?

  •   Is my money safe ?

I find some clients leave their pensions in their older employer schemes more out of fear rather than looking at their options and forming a strategy. This leaves them exposed on a number of accounts. There is a chance they may forget about the policy or the pension administrators may not keep in contact with the clients (example: change of clients address or contact details).

In general, the biggest benefit of moving your pension out of a former employers’ pension plan is that you will have direct control over it and you do not need to concern yourself with contacting an extra 3rd party which could include Trustees and/or your previous employer. You can usually move it into a new pension arrangement or a Retirement Bond in your own name.

Depending on a person’s circumstance, it can make sense to preserve the benefits in what is called a Retirement Bond. This is your own personal pension and importantly, it preserves the exact benefits that you would have had in your employers’ pension.

What a lot of people do not realise, is that if you were to move your old pension arrangement into, for example, a PRSA pension plan, you could be missing out on benefits that do not transfer over to a PRSA. A lot of pension schemes have a tax-free lump sum option which is not available in PRSA’s. This means that there may be cases where people are losing out by moving their pension into a PRSA.

Another benefit of a Retirement Bond is that if you have preserved benefits in these plans, you normally have access to them from age 50. If you have merged your pensions together or moved it to an active PRSA, you may have to wait longer to drawdown the benefits.