Pensions - Changes In Circumstances

Below are some typical changes in circumstances that can have implications for pensions.

Changed work arrangements

This could be things like, taking a career break, moving to part-time employment, job sharing, or taking extended maternity leave.

For an employer pension plan ask your employer what effect, if any, your new arrangement will have on your retirement benefits. If you envisage a shortfall, you should consider topping up your benefits with AVCs or NSP depending on your circumstances.

For personal pension plans, they allow you to stop paying contributions for a time or to increase or reduce your contributions, although this may be subject to a minimum level of contribution and a charge.

For PRSA, you are free to stop, start, increase and decrease your contributions at any time, although your PRSA provider may require prior notice of a change.

Redundancy or moving jobs

For an employer pension plan, within two months of leaving the pension scheme, you should receive a ‘leaving service options letter’. If you were less than two years in your employers pension plan (depending on the rules of the scheme), you may be able to get back any contributions you made to the plan in cash, though you will have to pay income tax on it. If you have been in the pension plan for two years or more, you usually have to leave your pension benefits. These are preserved until you reach retirement age so make sure to take details before you leave. Or you may be able to transfer your benefits to a PRSA, an approved insurance policy or contract such as a buy-out bond, or new company pension scheme.

For a personal pension plan, some plans allow you to stop paying or reduce your contributions (subject to limits). You can continue to hold on to your pension if you move to another job or start working for yourself. You will not get tax relief on any further contributions you pay to your personal pension plan, unless you have new self employed earnings, or you move to a job where an employer pension plan is not available to you.

For PRSA, you can move a PRSA from one job to another. You can’t get tax relief if you’re not working and paying tax and if you get a new job make sure your contributions stay under the revenue threshold for tax relief. You are free to stop, start, increase and decrease your contributions at any time, although your PRSA provider may require prior notice of a change. If you don’t pay into a PRSA for two years or more, and the balance is less than €650, then the PRSA provider can cancel your PRSA and refund the balance to you, less tax. The provider has to give you three months notice before doing this.

Illness (cannot work)

For employer pension plans, some employers provide an enhanced ill-health pension for their employees if they have to retire early due to bad health. Or you may be able to buy private income protection insurance

For personal pension plans and PRSA, If you are unable to work for a time, you can stop all contributions to your personal pension, or reduce them. If your situation is more permanent, you may be able to draw on your personal pension plan or PRSA.

Retire early

Your retirement benefits will be much lower than if you waited to take them at your usual retirement age.

For employer pension plans, if the pension trustees and your employer agree, you may be able to retire from 50 onwards.

For personal pension plans. generally you need to be 60 or over before you can start taking benefits (unless your occupation is one where people usually retire before age 60).

For PRSA, you may be able to take your benefits if you retire early at the age of 50 or over.

Death

For employer pension plans. your plan will have rules about what the fund will pay out to your dependants if you die while you are still employed. A lump sum can be paid, up to a maximum of four times your salary, at the date of death.

For personal pension plans and PRSA, the value of your plan passes on to your estate for the benefit of your dependents.