Pension fund -2 year minimum

daheff

So I have a question

Most companies I've worked for have had a pension scheme. However, if you leave before you are in the scheme 2 years you would have to take back any contributions from the scheme...you would not be able to keep them in the scheme.


Does anybody know the reason for this?



- I get that company contributions are only 'yours' after 2 years, as its kinda like a golden handcuff....but why can I not keep mine in the pension scheme?

Henry Ford III

It's called "vested rights". The value of employers contributions is always yours after 2+ years in the scheme.

If you leave beforehand and take a refund of contributions the employers portion is returned to them.

p.s. You don't have to take a refund of contributions even if you haven't had 2 years scheme service.

daheff

i'm more interested in why my contributions would not be able to stay in the pension fund.

Henry Ford III

daheff wrote: »

i'm more interested in why my contributions would not be able to stay in the pension fund.

No reason they can't.

daheff

Henry Ford III wrote: »

No reason they can't.

I can't see a reason either, but I'm being told its not possible.

Henry Ford III

daheff wrote: »

I can't see a reason either, but I'm being told its not possible.

Have you left employment and if so have you received a "leaving options" letter from the admins of the scheme?

If not who is telling you this info?

p.s. Are you on good terms with the employer?

Grassey

daheff wrote:

i'm more interested in why my contributions would not be able to stay in the pension fund.

Because the trustees of the scheme don't want to be responsible for deferred members where there is an option to easily get rid of them.

Your options on leaving will be:
Refund of your contributions less tax @20%
Transfer full value of your contributions (and the attaching service period) to your new employer pension scheme
Transfer to PRB/BOB
Leave in original scheme.

If you've less than 2 years contributions made there is little value leaving it sitting in old scheme. It's another pot to worry about getting eroded by charges when you have the option to amalgamate funds in new ER scheme and lock in their contributions with attaching service transfers too should you end up leaving in less than 2 years.

PieOhMy

Grassey wrote: »

Because the trustees of the scheme don't want to be responsible for deferred members where there is an option to easily get rid of them.

Your options on leaving will be:
Refund of your contributions less tax @20%
Transfer full value of your contributions (and the attaching service period) to your new employer pension scheme
Transfer to PRB/BOB
Leave in original scheme.

If you've less than 2 years contributions made there is little value leaving it sitting in old scheme. It's another pot to worry about getting eroded by charges when you have the option to amalgamate funds in new ER scheme and lock in their contributions with attaching service transfers too should you end up leaving in less than 2 years.

Very comprehensive answer there to a similar question I have raised recently at work and gotten a confusing answer to:

- if, say due to redundancy, an employee was no longer employed by the company effective before the employee reached the 2 years service necessary to bring the employers contribution with them, is this just hard luck on the employee as they will not meet the requirement (albeit through no fault of their own) or does that fact that the 2 years wont be met due to the employers decision give any standing to being able to carry the employer contribution on to the next pension?

Apologies if its a poorly phrased question!

daheff

Henry Ford III wrote: »

Have you left employment and if so have you received a "leaving options" letter from the admins of the scheme?

If not who is telling you this info?

p.s. Are you on good terms with the employer?

Not leaving job. Just something I picked up reading a document a while back and wondered about.

Ace2007

daheff wrote: »

Not leaving job. Just something I picked up reading a document a while back and wondered about.

have you a deferred DC pot elsewhere? - if so just Transfer it in and the service from the previous employer goes with it - so if you have say 4 years, the 2 years doesn't apply. So then if you do leave the current employer with less than 2 years service, you won't lose the employer contributions.

daheff

Ace2007 wrote: »

have you a deferred DC pot elsewhere? - if so just Transfer it in and the service from the previous employer goes with it - so if you have say 4 years, the 2 years doesn't apply. So then if you do leave the current employer with less than 2 years service, you won't lose the employer contributions.

Really? didnt know that. It cant be right though? I'd have thought the company pension contributions have to be in the pot for >2 years to be kept?

Ace2007

daheff wrote: »

Really? didnt know that. It cant be right though? I'd have thought the company pension contributions have to be in the pot for >2 years to be kept?

nope, if they accept the Transfer in, the service as well as the fund value transfers in.

http://www.pensionsauthority.ie/en/LifeCycle/Benefits_payable_on_leaving/Preservation_of_benefits/

Membership of an occupational pension scheme ceases when you leave that employment. If you have more than two years' qualifying service, which normally means two years in the scheme as a member for pension purposes, you will be able to leave your benefit in the scheme until you retire (known as a deferred or preserved benefit), or move or transfer the value of your pension benefits to another pension arrangement.

Definition of qualifying service

Qualifying service
A term defined in the Pensions Act as the service which a pension scheme member must complete before becoming entitled to a preserved benefit on leaving service. Currently, it is two years' service including any period in a previous scheme from which a transfer value was received.

http://www.pensionsauthority.ie/en/LifeCycle/Glossary/?index=Q