Pension transfer offer

Ally Dick

I was on here a while ago ranting about Bank Of Ireland trying to buy me out of my preserved defined benefit pension. In summary I left the bank in 2014 on voluntary parting. I am entitled to a preserved DB pension in just over 9 years which will pay €30k a year. My pension was previous valued at 325k as a cash transfer value. The bank have written to me to offer me an "enhanced" transfer value of €700k, for me to leave the DB scheme, and set a private pension up of my own. Would there be anything out there that would compare to a DB pension paying €30k a year from the age of 60 ? Someone told me that I could transfer the money into a bond that would pay 3-4% per annum and that I could draw down anytime now that I am over 50. A woman on with Joe Duffy the other day was told that a €30k a year pension would cost A MILLION to buy. Not sure the logistics of that one. Any ideas if I could get anything worthwhile for 700k?

Alkers

What age are you now? I do know that upon retirement, for every 100,000e in your pension, that will equate to approx 5,000e per annum from retirement until death. This figure is also declining rapidly.

Atlantic Dawn

A 300k fund would bring in about 11k a year at 65, if I was you I wouldn't settle unless they offered a 900k fund.

Ally Dick

Simona1986 wrote: »

What age are you now? I do know that upon retirement, for every 100,000e in your pension, that will equate to approx 5,000e per annum from retirement until death. This figure is also declining rapidly.

I'm 50 now

Henry Ford III

Get proper advice.

Low interest rates mean annuity rates are also low.

On the flipside going into a buyout bond will give you control, and the ability (for the first time) of accessing the ARF regime. It'll also allow you take early retirement.

It's a big decision so tread carefully, and absorb every aspect of your choices.

bridster007

There is a lot more to consider here than whether 700k is fair value for the 30k. And fair value will depend on the terms of your pension, guaranteed increases/spouses pension etc. So it will certainly be more than 700k, probably €1m+. But, your minimum entitlement in a scheme windup under the Pension Acts (even assuming fund is fully funded) is way less than 700k. They will not offer full market value, why would they? .

A bird in the hand....

When you get to pension age you won't have the option of the 700k so you will be stuck with your annual pension that will die with you, subject to spouses 50% pension (presumably). So don't discard this offer just because it is below a market value. And as Henry says, the market value is skewed ( temporarily ???) due to low interest rates.

You can take 25% of the 700k out of your fund tax free.
Balance can be put to an ARF untouched until 60 if you wish.


Sit down with a fee based Financial Advisor to look at your full financial position and what you lifestyle/income/outgoings will be over next 10 yrs. It's worth spending money on this.
Make it clear to the advisor that you want fee based advice and that if you take the transfer you will not be using his services. This is the best way to get an independent viewpoint.

alphatango

Does the Bank not have to pay a member of the defined benefit deferred pension scheme a certain value when they reach pension age? I was under the impression this was the case. I have not received a letter yet and have four years to go until pension is payable so for me I suspect I would be better off staying with the Bank pension. Any thoughts on this would be appreciated.

Ally Dick

I spoke to my accountant and he says that there are dirty tricks the bank can use to get out of it. He didn't elaborate though. To my mind they can only get out of it if the bank goes bust and can't afford to pay it. That's unlikely

alphatango

Ally Dick wrote: »

I spoke to my accountant and he says that there are dirty tricks the bank can use to get out of it. He didn't elaborate though. To my mind they can only get out of it if the bank goes bust and can't afford to pay it. That's unlikely

Yes, I think it's unlikely they will be unable to pay it but are putting this offer out there in the hopes of getting rid of some deferred pensioners rather than go down the route they have already gone down twice in the last approx. 6/7 years.

Kristopherus

alphatango wrote: »

Does the Bank not have to pay a member of the defined benefit deferred pension scheme a certain value when they reach pension age? I was under the impression this was the case. I have not received a letter yet and have four years to go until pension is payable so for me I suspect I would be better off staying with the Bank pension. Any thoughts on this would be appreciated.

On no account should you agree to anything other than the entitlement that you currently have. Anything the bank offers you will be far less than what you have accrued to date. You are very close to retirement so they may hold off trying to "buy" you out. Your attitude should be "What I have, I hold".

Ally Dick

Some people will be tempted because if they are over 50, they can transfer into a private pension fund and start drawing...but we all know that this means less money in the pot at 60. My offer is 200k short of what my accountant thinks I should be offered. And besides, the bank are not doing this to help out deferred pensioners. They're helping themselves get out of a bind

Ally Dick

The bank is spending a billion on Omega project. Can't help thinking they should use it to fix up the pension fund

Merowig

Personally I would not accept the offer (especially when you are just 9 years away from it).


The previous (now closed) thread is at http://www.boards.ie/vbulletin/showthread.php?t=2057646112

P.S.: According to news articles project Omega is 500 million - the pension gap though is 1.5 bn

http://www.irishtimes.com/business/financial-services/moody-s-warns-on-bank-of-ireland-s-pension-deficit-1.2725894
http://www.irishtimes.com/business/financial-services/bank-of-ireland-pension-gap-seen-nearing-1-5bn-by-jp-morgan-1.2792795
http://www.irishtimes.com/business/financial-services/bank-of-ireland-to-spend-500m-on-enhancing-software-1.2815284

Ally Dick

Omega is a lot dearer. The bill for Accenture alone is over €1 million a day....that's over 1000 Accenture staff at €1340 per day each

BuffyBot

Ally Dick wrote: »

Omega is a lot dearer. The bill for Accenture alone is over €1 million a day....that's over 1000 Accenture staff at €1340 per day each

Can we not go down this route again? This forum is for personal advice, not soapboxing

Ally Dick

BuffyBot wrote: »

Can we not go down this route again? This forum is for personal advice, not soapboxing

Sorry Buffybot

bridster007

Ally Dick wrote: »

Some people will be tempted because if they are over 50, they can transfer into a private pension fund and start drawing...but we all know that this means less money in the pot at 60. My offer is 200k short of what my accountant thinks I should be offered. And besides, the bank are not doing this to help out deferred pensioners. They're helping themselves get out of a bind

Why speak to an accountant ? Most will not understand the complexities of the issues, calculations or more importantly, options. It's not in their training or experience. His figure of 200k may be right or wrong or more likely, irrelevant to the decision you need to make.
Forget about Omega or whatever it is. Forget about why the bank are offering it. Forget what they should offer.

Ally Dick

So are you saying I should just let them pay me my deferred pension when it's due?

Henry Ford III

Ally Dick wrote: »

So are you saying I should just let them pay me my deferred pension when it's due?

They don't necessarily have to do that either btw.

If the deficit in the D.B. scheme can not be made up the employer can just wind up the scheme offering a cash transfer value only. All D.B. from that point on would cease.

They would be really unpopular if they did that but it is possible, and I've seen it happen.

Ally Dick

Henry Ford III wrote: »

They don't necessarily have to do that either btw.

If the deficit in the D.B. scheme can not be made up the employer can just wind up the scheme offering a cash transfer value only. All D.B. from that point on would cease.

They would be really unpopular if they did that but it is possible, and I've seen it happen.

Could they do this to deferred members only or would they have to do it to all members? That's 6500 people versus around 16000

Henry Ford III

Ally Dick wrote: »

Could they do this to deferred members only or would they have to do it to all members? That's 6500 people versus around 16000

They could do it to anyone not yet in receipt of an annuity.

A defined benefit is only of value where the scheme can continue pay it's obligations.

jippo nolan

Ally Dick wrote: »

Could they do this to deferred members only or would they have to do it to all members? That's 6500 people versus around 16000

Check out how Deferred members of the Irish Airlines superannuation scheme were treated.
We thought we were guaranteed a reasonable
Income on retirement.
Seek professional advise, money well spent.
Feel free to pm me.