Pensions have a reputation for being complicated. It’s no wonder, with many different pension schemes, hundreds of funds, and a lack of transparency around fees and performance.
Until now, at least one thing had been fairly straightforward – timing. If you wanted to transfer your occupational pension, you could do so whenever you were ready.
All that changed overnight in mid-August, however, when Revenue updated Chapter 13 of its Pensions Manual.
The manual was revised to state that transfers from an occupational pension scheme to a PRSA may not be permitted where pension benefits “become payable” to the pension holder.
Pension benefits usually “become payable” at Normal Retirement Age (NRA). Your NRA can vary depending on your pension scheme.
Essentially, once you reach the retirement age set out by your scheme, it’s too late to transfer your pension to a PRSA.
The update also affects payments to another exempt approved scheme or a buy-out bond (BOB), especially in relation to taxation and timing.
As a result of this change to the Pensions Manual, Trustees may refuse your request to transfer
benefits if you have reached NRA and have a Defined Benefit or Defined Contribution pension.
However, where Trustees continue to grant a transfer, many PRSA providers will continue to accept these transfers. This is because Revenue’s update to the Pensions Manual does not impact the receiving PRSA company.
Does this pension update impact you?
This major update is important information for anyone who is approaching retirement age with an occupational pension. If you’re thinking about transferring your pension to a PRSA, you should take action sooner rather than later.
It also affects those who have reached retirement age, as they may now be refused a request to transfer their occupational pension.
What action should you take?
If you are coming up to retirement age and you are weighing up transferring your occupational pension to a PRSA, you should get your ducks in a row.
Many people transfer their occupational pension to a PRSA so that their pension is not tied to an employer and to gain greater control over their retirement savings.
They also have the advantage of giving people more choice over where their money is invested compared to some older pension schemes.
So what should you do?
If you are thinking about transferring your pension, you should take the following steps:
- First of all, you should check out your scheme’s rules. Find out the normal retirement age that is associated with your pension scheme. For some, it can be as early as 60.
- Get a Certificate of Benefit Comparison. This is needed so that you can compare how transferring would benefit you compared to staying put in your current scheme.
- Speak to a financial advisor. Like all important financial decisions, it is important that you speak to a qualified professional who can advise you on the best course of action to make the most of your retirement savings.
