Before we start: this article deals specifically with moving defined benefit, or final salary, pension schemes from the UK into Ireland. If you’re looking for a general view on moving your pensions back to Ireland, please click here.
If you spent some of your career working in the UK, you may have built up defined benefit pension entitlements. These can be surprisingly valuable – even if your time in the job that provided them was quite short.
If you now live – or plan to retire – in Ireland, there are some special considerations when it comes to moving a defined benefit pension scheme back. We’ve outlined the main steps below.
Defined benefit to defined contribution
First, the big one. If you transfer out of a defined benefit (DB) pension, by definition you are walking away from a pension which promises to pay you a guaranteed income in retirement.
Instead, you’ll be paid a transfer value which reflects the estimated value of that guaranteed income.
Now, if you want to, it’s possible to use that cash to buy a guaranteed income (called an annuity) in retirement. But until you do, your pension will be in the form of a sum of cash, which you’ll want to invest for growth.
There can be good reasons to give up a defined benefit pension. For example, you might want the greater control that comes with having a cash pension pot which you can invest. Or your UK defined benefit pension scheme might offer you an incentive to transfer out, increasing the value of your pot.
Or perhaps you’re no longer confident that your DB scheme will be able to stump up the benefits when retirement comes.
I get that – how do I make a start?
If you’re looking to move your DB pension scheme, you’ll need to ask your UK pension provider for a transfer value (technically a ‘cash equivalent transfer value’). This is the amount your pension scheme is willing to pay in cash to your new pension in Ireland.
At the same time, your UK pension provider will supply several documents so you can apply to make the transfer.
In particular, if the transfer value of the pension scheme is £30,000 or over, they must have evidence that you have received financial advice from a UK-regulated advisor in connection with the transfer.
What’s the purpose of the UK advice?
A UK financial advisor will compare the benefits you’d receive under your existing scheme, to the benefits you’ll receive under the proposed Irish pension.
Arising from UK regulation for all DB transfers worth over £30,000, this is a detailed piece of work which takes into account your wider pension plans and family situation.
Moneycube can arrange the required UK-regulated advice as part of our overall service to move your UK pension across to Ireland.
Where can I invest my pension when it is transferred?
The UK imposes obligations on pensions which accept money from UK pension schemes. You’ll need to move your pension to qualifying registered overseas pension scheme (or QROPS). (Moneycube has relationships with all QROPS providers in Ireland). You can read more about this here.
Moving a UK defined benefit scheme back to Ireland needs some consideration, but is often the right solution if you intend to remain in Ireland, want more control and visibility over your investments, want to easily access ongoing financial advice, and to have your pension assets based where you intend to retire.