Pensions: Getting In And Getting Out
You may be reluctant to join a company pension scheme because you plan to change jobs within a short period of time.
The good news is that you will be eligible for a refund of your contributions if you leave the firm in less than two years.
The bad news is that the Government will claw back the tax relief from whatever amount you have saved while your employer will also be entitled to a refund of their contributions.
However, because the tax on that refund is capped at the basic rate of 20%, this option can be beneficial to higher rate tax payers.
Within six months of leaving service, you should receive a statement from the pension administrators, outlining all your options. This applies whether your scheme is Defined Contribution (DC) or Defined Benefit (DB).
If you have under two years’ service, these will include a refund, as outlined above, or you may choose to transfer your contributions to a new employer’s pension scheme or a personal retirement bond (PRB).
If you have more than two years’ pensionable service, your options will include retaining your benefits in the scheme as well as transferring your contributions to a new pension plan or a PRB.
In some instances, you may be allowed transfer the money to a personal retirement savings account (PRSA).
Eligibility for this option includes having less than 15 years’ service with your employer.
If the value of your pension fund is over €10,000 and you are in DB scheme, you will also have to pay for a Certificate of Benefits Comparison (typically costing between €500 and €1000) outlining the pros and cons of moving to a PRSA.
Pensions are complicated so it’s always wise to seek expert advice when making important decisions about your financial future.