Advice if Your Pension Scheme is Being Wound Up
8 April 2021
We have had several clients contact us recently about a letter issued to them concerning the Pramerica Ireland Pension Scheme. Pramerica has taken the decision to wind up their pension scheme and so all assets in the pension fund will be distributed.
During April, current and past employees that are still members of the scheme will be issued with a letter outlining the options they have with regard to their benefits. They will only have one month to confirm their chosen option. If you do not make contact within one month of the options being issued to you, your fund value will automatically be transferred to the default option.
Before I start going through the different options available, remember everyone’s circumstances are different and I would urge you to speak with an impartial financial adviser to discuss your own situation so that you are making the best decision for you. When it comes to financial advice, we do not recommend a “one size fits all” approach.
You will receive an option statement in the coming days setting out the choices available in your specific situation. You will have different options depending on whether you are still working for Pramerica, if you are now employed by Tata Consultancy Services or if you no longer work for either.
Without going into the specifics of the options available to the Pramerica Scheme members, on wind up of a scheme, typically, you will have the following options for your pension fund:
1. Move your pension to a new employer:
You could have the option to move your pension to your new Employer’s pension scheme if the new employer has a scheme available and the scheme rules allow it.In this case you should consider the fact that the scheme rules of the new employer’s pension fund will now apply to your Pramerica Pension Benefits.
This will most likely be the default option for those that are now working with Tata Consulting Services (TCS) or those who remain with Pramerica (your fund value will be moved from their old scheme into their new scheme).
2. Move your pension into an account in your own name:
It is possible to move your pension into a Personal Retirement Bond (PRB) or Personal Retirement Savings Account (PRSA) in your own name.In doing so you are taking control of your pension which enables you to cut the cord with your old employer and at the same time, keep your pension benefits independent from your new employer, perhaps increasing your options for drawing on that money when retirement day finally comes.
In this case, you control the investment choice. You also have the benefit of reviewing the open market and deciding on which provider offers you the charging structure and options best suited to your individual circumstances.
3. Get a refund of your contributions to date:
This option will only apply to a very small minority who have not been part of the pension scheme for very long. If this is an option on the wind up of the Pramerica scheme and you do choose it you should note that you will be sacrificing any employer contributions that were paid to the scheme on your behalf. These will be paid back to the employer. The refund you get will be subject to income tax at a rate of 20%.
4. Do nothing (Default Option):
Depending on which of the categories you fall into i.e. still working with Pramerica, now employed by Tata Consultancy Services or no longer employed by either your default option will differ but will probably fall into one of the first 2 above.
We are all guilty of being too busy to look at the options and sometimes we let the default option happen. While it may be the most suitable option for some members, this is not always the case. We would urge you to take control of your choices and get a 2nd opinion from a qualified financial advisor who should be able to explain each option in more detail.
For many, there will be an obvious path but when you do not understand pensions it can be daunting having to make such a decision without being fully informed on the outcome and impact of each option.
Jacinta Clerkin, BSc QFA FLIA RPA, is a Qualified Financial Advisor, Fellow of the Life Insurance Association and Retirement Planning Advisor. You can contact her through John F. Loughrey Financial Services by telephone on 074-9124002 or by email on email@example.com.