Changing landscape of pensions access

By Diarmuid Blake

On June 22, 2016 the then Minister for Finance, Michael Noonan, introduced legislation that changed the landscape of accessing defined benefit pensions.  However, these changes have not really been made known publicly to defined benefit pension owners.

If you previously worked in companies such as Eircom, Diageo, Intel, Pfizer, any Bank or a company that provides a defined benefit pension to their employees, this article is very relevant to you.

Prior to 2016 owners of defined benefit pensions were restricted to the rules of their ex-employer’s pension scheme.  These rules were quite limited in the following circumstances:

■ When you could access your pension. For most schemes, access to this money was restricted to the ex employees 60th or 65th birthdays.

■ What would happen to your pension in the event of your untimely death? Many schemes offer a very limited (or sometimes even zero) sum of money to the deceased pension holder’s family if the pension holder becomes deceased.

The new legislation that was introduced now means that there is an alternative option of drawing down and accessing these defined benefit pensions.

This alternative option now allows ex-employees obtain a “Transfer Value” of their pension.  By choosing this option, the individual foregoes the traditional drawdown pension options (of receiving a set annual income for life when he/she retires) for a lump sum transfer value.  In many circumstances the transfer value offered by the relevant companies is quite substantial.

The main benefits of this alternative option are:

■ The individual can access their pension from age 50 onwards

For more, read this week’s Connacht Tribune.

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