PENSIONS INVESTMENTS LIFE INSURANCE GUIDE TO OPTIONS UNDER A COMPANY PENSION SCHEME ON LEAVING EMPLOYMENT ON WIND-UP OF SCHEME This information document must be provided by tied agents (or employees) of Irish Life when advising the customers of Irish Life on their options under a company pension scheme if leaving employment or on wind-up. POTENTIAL OPTIONS AVAILABLE 1. LEAVING YOUR PENSION FUND IN YOUR EXISTING COMPANY PENSION SCHEME When a person leaves employment and they were a member of a pension scheme, one of the options that may be available to them is to leave their benefits in their former employer s pension scheme. This is known as a deferred benefit or pension. If your scheme is a Defined Contribution company pension arrangement you will continue to be invested in the fund(s) chosen by the scheme trustee(s) for you,if allowed. If your scheme is a defined benefit scheme, your adviser will not be able to provide you with advice about transferring from that arrangement. You will need to discuss your options with your scheme Trustees. If your scheme is being wound-up, this option will not be available to you. It will not be possible to remain in your existing company pension scheme and your Adviser will take you through your other options. However, if your scheme is a one-member arrangement it may be possible, instead of the scheme being wound-up, to continue the plan as an investment where new trustees are appointed. You, the member, can be appointed as trustee. You should ask your adviser about this option. 1
2. TRANSFERRING TO A PERSONAL RETIREMENT BOND A Personal Retirement Bond (PRB), which is also sometimes known as a Buy-Out-Bond, is used by the Trustees of a pension scheme to buy retirement benefits for former members of their pension scheme. A PRB is a personal policy in the policyholder s name. The value of their fund when they leave the pension scheme is invested in the bond. This bond is invested in unit linked funds as selected by the Trustees and/or policyholder. The retirement options available to the policyholder under the PRB are the same options available under the original company pension scheme. The value of the fund at retirement will depend on fund performance to the date benefits are taken. A PRB can be purchased when: An employee leaves employment When a member leaves a pension scheme When the scheme winds up 3. TRANSFERRING TO A PERSONAL RETIREMENT SAVINGS ACCOUNT A Personal Retirement Savings Account (PRSA) is a savings plan in your name which can receive a transfer of retirement funds from another approved company pension arrangement. Restrictions apply and your adviser will confirm whether this option is available to you. You can leave the transferred fund in your PRSA until you retire. Your retirement benefits include a retirement lump sum of up to 25% of the fund and a choice to buy an annuity with the remainder or invest in an Approved Retirement Fund (ARF), subject to restrictions. You may make contributions to your PRSA and if your employer wishes, they can also contribute. Tax relief is available but not automatically guaranteed. The PRSA can be invested in a range of investment funds and at retirement it can be used to provide benefits. 4. TAKING RETIREMENT BENEFITS If you are over 50, it is possible that you can take retirement benefits from your existing company pension scheme. Taking retirement benefits early means your benefits will be reduced in value. You will have access to a reduced lump sum payment. This option needs very careful consideration especially regarding whether you will have sufficient income to cover your retirement years. 5. TRANSFERRING TO ANOTHER REVENUE APPROVED COMPANY PENSION SCHEME OPTION If you change employment and your new employer has an exisitng pension scheme or is willing to set one up on your behalf, you can transfer the proceeds of your existing pension scheme into this scheme. Your service with the old employer will be absorbed into your new scheme and is treated as retained benefit. 2
POINTS TO CONSIDER BEFE TRANSFERRING TO A PRB PRSA 1. Do any adjustments or restrictions apply to the client s transfer value? 2. Does the client have any provisions in their current scheme that they will no longer be able to keep? 3. Does the client need immediate access to their funds (only applicable if their pension scheme allows early retirement benefit and they qualify to take it)? 4. Will the client require access to funds before their normal retirement age? 5. Is the client a member of, or able to join, a pension arrangement with a different employer to the one from which the transfer value is available? CHOOSING A PRB A PRSA GENERAL POINTS PRB benefits are very similar to those under an Occupational Pension Scheme. PRSA benefits are very similar to those under a Personal Pension Plan. Transfers between PRBs and PRSAs are not allowed. Transfers from Occupational Pension Schemes to PRBs are allowed, when a member has left employment, or has left the pension scheme or if the pension scheme has been wound up. There is a default option where Trustees can elect to transfer members to PRBs or PRSAs without their consent. Currently in Irish Life Corporate Business we offer the PRB option, but not the PRSA option without member consent. Warning: The value of your investment may go down as well as up. COMPARISON TABLE OF YOUR POTENTIAL OPTIONS UNDER YOUR EXISTING COMPANY PENSION SCHEME - PLEASE STUDY CAREFULLY LEAVING FUNDS IN EXISTING COMPANY PENSION SCHEME CPATE PERSONAL RETIREMENT BOND PRSA JOINING A NEW COMPANY PENSION SCHEME (YOU SHOULD CHECK WITH THE TRUSTEES OF THE SCHEME F THE SPECIFIC CHARGES) Entry charges on transferring in There is no charge if you leave your fund in your existing scheme. Entry charges may apply and depend on the size of your transfer value. It could be up to 2%. There is no charge on the transfer value paid to your PRSA. Entry charges may apply and depend on the size of your transfer value. The charges can range from 0% to 5%. Early exit charges Your existing company pension scheme may have a penalty for leaving the scheme early (transferring). You need to ask your trustee if this applies. Early exit charges apply. They range from 4% to 0% over the first five years. There are no early exit charges. Early exit charges apply. They range from 5% to 0% over the first five years. Fund charge The fund charge depends on your scheme charges. You need to check with your trustee. The minimum fund charges can range between 0.75% and 1% up to a maximum of 1.5%, depending on the fund(s) chosen. Under a Standard PRSA, the maximum charge is 1% of the fund value per year. Under a non- Standard PRSA, where the fund choice is different, the fund charge could be higher. The fund charge can range between 0.75% and 2.15% depending on the fund chosen. 3
COMPARISON TABLE OF YOUR POTENTIAL OPTIONS UNDER YOUR EXISTING COMPANY PENSION SCHEME - CONTINUED LEAVING FUNDS IN EXISTING COMPANY PENSION SCHEME CPATE PERSONAL RETIREMENT BOND PRSA JOINING A NEW COMPANY PENSION SCHEME (YOU SHOULD CHECK WITH THE TRUSTEES OF THE SCHEME F THE SPECIFIC CHARGES) New contributions It is not possible to make new contributions into your existing company pension scheme unless they relate to the same employment. It is not possible to make new contributions into a PRB unless they relate to same employment. It is possible to make new contributions into a PRSA. Entry charges up to 5% will apply. It is possible to make new contributions into a new company pension scheme. Entry charges up to 7% will apply. Investment options This depends on the funds available within your existing scheme please check with your trustees. The PRB offers a wide range of funds. It also offers an investment strategy. It would also offer certain specialist funds not available under PRSAs. PRSAs offer a wide range of funds and different investment strategies. A new company schemes offers a wide range of funds and different investment strategies. It would also offer certain specialist funds not available under PRSAs. When can you take retirement benefits (a) At your normal retirement between 60 and 70. (b) On early retirement maximum benefits may be restricted. (c) Between age 50 and 60 but only if you have left the employment to which benefits relate. (a) At your normal retirement between 60 and 70. (b) On early retirement maximum benefits may be restricted. (c) Between age 50 and 60 but only if you have left the employment to which benefits relate. (a) Any time between 60 and 75 (b) From age 50 if you leave employment 25% retirement lump sum. (a) At your normal retirement between 60 and 70. (b) On early retirement maximum benefits may be restricted (c) Between age 50 and 60 but only if you have left the employment to which benefits relate. Retirement benefits A lump sum based on your service and salary with your employer*** 25% retirement lump sum and (a) an annuity for life or (b) an Approved Retirement Fund* *This option may not be available to all company pension scheme holders. Please ask your adviser. A lump sum based on your service and salary with your employer*** 25% retirement lump sum and (a) an annuity for life or (b) an Approved Retirement Fund* 25% retirement lump sum and (a) an annuity for life or (b) an Approved Retirement Fund. A lump sum based on your service and salary with your employer*** 25% retirement lump sum and (a) an annuity for life or (b) an Approved Retirement Fund. *This option may not be available to all PRB holders. Please ask your adviser. Continuing your plan after you retire You cannot continue your company pension scheme as an AMRF** or ARF* after you take retirement benefits. You will need to take out a new AMRF**/ARF*. You cannot continue your PRB as an AMRF**/ ARF* after you take retirement benefit. You will need to take out a new AMRF**/ARF. You can continue your PRSA as an AMRF** or an ARF* after you take retirement benefits. You cannot continue your company pension scheme as an AMRF** or ARF* after you take retirement benefits. You will need to take out a new AMRF**/ ARF*. *ARF - Approved Retirement Fund **AMRF - Approved Minimum Retirement Fund *** The Revenue Commissioners have set rules which will be followed if your lump sum is calculated by reference to your service and salary 4
RETIREMENT BENEFIT OPTIONS F A PRSA HOLDER OPTION 1 OPTION 2 If the customer does not have a guaranteed income 12,700 a year they can: Buy an annuity for life. If the customer has a guaranteed income for life they can purchase an annuity so that when the annuity is added to the existing guaranteed income for life it is equal to 12,700 per annum and leave the rest of the fund in the PRSA taking withdrawals as they want or take the rest as taxable cash. Leave 63,500 in the PRSA or buy an annuity with that amount and leave the rest of the fund in the PRSA taking withdrawals as they want or take the rest as taxable cash. Invest the first 63,500 in an Approved Minimum Retirement Fund (AMRF) or an annuity for life and invest the rest in an Approved Retirement Fund (ARF) taking withdrawals as they want or take the rest as taxable cash. If the customer has a guaranteed income for life of at least 12,700 per annum, then they can: Buy an annuity for life. Leave the fund in the PRSA taking withdrawals as they want. Invest in an ARF taking withdrawals as they want. Take the rest as taxable cash. You will have to pay income tax, Universal Social Charge and PRSI (if applicable) on any income you receive either from an annuity or withdrawals from an ARF, AMRF or vested PRSA. 5
RETIREMENT BENEFIT OPTIONS F A PRB HOLDER If a customer transfers their benefits from a defined benefit (DB) pension scheme they will only be able to avail of Option 1 below. If the member transfers their benefits from a Defined Contribution (DC) scheme after 6 February 2011 and provided that the scheme rules allow it, the policyholder can choose between Option 1 and Option 2 below. OPTION 1 OPTION 2 1. Take a lump sum based on your service and salary.* AND THEN 2. The balance of their pension fund must be used to buy a pension income for life/annuity. AND THEN 3. If you have chosen to contribute extra amounts into an AVC fund, you also have the option to convert the AVC fund into an ARF (Approved Retirement Fund)/ AMRF (Approved Minimum Retirement Fund) AVCs can also be used to buy a pension income for life/annuity. 1. Take a maximum immediate cash lump sum of up to 25% of your retirement fund.* AND THEN 2. Invest the next 63,500** of your pension fund in: - An AMRF or - Purchase an annuity to provide you with a pension income for life. - If the member has a guaranteed income for life they can purchase an annuity so that when the annuity is added to the existing guaranteed income for life it is equal to 12,700 per annum. If you have provided us with satisfactory proof that you have a guaranteed lifetime income of at least 12,700** a year (including any State benefit applicable), you can: 3. Take the balance as a taxable lump sum Transfer the balance to an ARF. *To find out more about the tax treatment on these lump sums the member should contact their Financial Adviser. **These amounts may change (up and down) as specified by the Government. The amounts quoted are correct as at April 2015. CONTACT US PHONE: 01 704 20 00 FAX: 01 704 19 05 E-MAIL: code@irishlife.ie WEBSITE: www.irishlifecorporatebusiness.ie WRITE TO: Irish Life Assurance plc, Lower Abbey Street, Dublin 1 Please Note: Every effort has been made to ensure that the information in this publication is accurate at the time of going to press. Irish Life Assurance plc accepts no responsibility for any liability incurred or loss suffered as a consequence of relying on any matter published in or omitted from this publication. Readers are recommended to take qualified advice before acting on any of the matters covered. 4310cb (rev 1-15) Irish Life Assurance is regulated by the Central Bank of Ireland. In the interest of customer service we may record and monitor calls. Irish Life Assurance plc, Registered in Ireland number 152576, Vat number 9F55923G. For more up-to-date information, see www.irishlifecorporatebusiness.ie. 6