I have 2 pension funds with my former employer.
One is a guaranteed with-profits fund that is paid up since the early 90s. The other is a defined contribution pension that is paid up since I left the job in 2014. I am 60 and wonder is it possible to draw down one of the funds and leave the other one invested. Both funds are under the trusteeship of my former employer.
Outstanding contributions are due to one of my funds on behalf of the employer which are taking the legal route to resolve. What options have I got with these funds?
Is it safer to leave them in the employer’s scheme or transfer them into my own name? Will there be charges involved if they are transferred from the employer’s scheme?
– Donie, Co Kilkenny
It doesn’t sound like there is anything safe about leaving these pensions with your former employer. If they have failed for many years to make contributions which were legally due, they have neglected their most basic obligation.
In general, if a form employer is failing on that, there is a strong case to move your money to a fund you can control yourself.
We would not expect that there will be penalty charges for transferring the pension.
Having said that, there are some specific considerations before you transfer out.
With-profits funds seem to come in two kinds: very poor, and surprisingly good. It’s worth finding out which category yours falls into. Some with-profits funds have delivered pitiful returns over many years, particularly in the low interest rate era. Others come with special terms such as guaranteed bonuses, which would never be available today.
Before you transfer out of a with-profits fund, check what you might be giving up. It might be more beneficial simply to draw it down under its existing terms.
Regarding the defined contribution fund, you may not be able to access it separately from the first pot of money, as they are both linked to the same employment.
Ultimately you’ll need to decide whether the legal discussions will realistically sort out the dispute in a timescale that is acceptable for you. If not, severing the connection between your employer and your pensions sounds prudent – even if you don’t draw down the benefits immediately.
This is adapted from a Moneycube column which appeared in the Sunday Independent in January 2024.
