How many companies have you worked for in the past, oh, let’s say ten years? Two? Three? More than five? The days of sticking with one employer for the entire duration of your career are well and truly over. So while the generation before us often reached retirement age with a single pension to unlock, it’s highly likely that you already have more than one pot for your pension from previous and current employers.
What’s the big deal, you ask? Isn’t it ok to have more than one pension pot? Surely they all end up doing the same thing – i.e. funding your retirement, so does it really matter if you have one or five of them? Technically, that’s true. But while it might seem like leaving well enough alone is the most hassle-free way to manage your pension, there are plenty of alternative choices available to you.
In this article, we’re breaking down your options when it comes to having multiple pots to help you decide if transferring your pension is a wise move.
Not all pensions are created equally.
First things first. If we’re going to talk about pension transfers, we first need to look at the main types of pensions that exist in Ireland. Because chances are, the first pension that you ever set up is likely to be very different to one that you’re contributing to right now. You may have started your first pension as part of a company pension scheme and paid the bare minimum into it every month because it was the responsible thing to do, but also – rent doesn’t pay itself!
There are four main pension types in Ireland, and it’s very possible that your own pension pots fall into more than one of these categories:
Executive or Occupational Pension:
Also known as a company pension scheme, an executive pension is one that both employers and employees can make contributions to, as well as claim tax relief on. Investment choices are generally widely varied. Claiming the fund can take place from the age of 50, provided you are no longer an employee with that particular company. This is the most common type of employer pension scheme in the country.
Personal Pension Plan:
This is a private pension, typically set up by Sole Traders or those who don’t have access to a company pension scheme. Tax relief is based on your age, and you can take your benefits from your 60th birthday onwards.
PRSA (Personal Retirement Savings Account) is available for anyone who doesn’t have access to a company pension scheme, for example part-time or casual workers, self-employed individuals, jobseekers, etc. It is also a common scheme amongst those who are in employment but whose employer does not contribute to their pension fund (although they are still entitled to do so under this scheme). There are two different types of PRSA – standard and non-standard, and the difference between the two lies in what you can invest in as well as the charges you incur (not capped for non-standard PRSA). You can draw your PRSA benefits from the age of 60, while still remaining in employment.
Personal Retirement Bond:
A Personal Retirement Bond (or Buy Out Bond as it’s often called) can’t exist unless you have previously held one of the above pension types and are transferring those benefits into a bond that has been established in your own name. So you won’t contribute to a PRB, as such. Investment options are widespread and access is granted from the age of 50.
So if you have accumulated a number of pensions over the years, you can see how they could all be performing very differently. Different access terms, different investment options, different rates, different charges. And keeping track of all of this on a regular basis is no easy feat.