Buy out Bond
Sometimes called a Personal Retirement Bond depending on the underlying Life Company, if you have changed jobs during the course of your career or have ever been made redundant, or had a limited company which had to be wound up, have you started a pension plan during that time. If the answer to this question is yes, then there is a good chance that you have a pension plan somewhere which isn't working as hard as it could be.
You can convert the value of your former employer's pension into a Buy Out Bond. This will give you full control over how and where the value of your pension is invested so that it better reflects your appetite for investment risk, your money will grow tax-free until you retire and the annual management charges are generally low, typically between 1% and 1.5%. There is quiet a lot of competition in the pension space currently and the management charges have come down considerably, some of the older pension structures have fairly high charges so by leaving a former pension plan where it is you may also suffer the cost of the charges as well as poor performance. Buy Out Bonds is that in certain circumstances you may be able to get access to the value of your Bond when you turn 50, rather than having to wait until the usual retirement age of 65.
The BOB has become much more popular for a variety of reasons. It removes the need to stay in touch with your previous employer. You will receive all correspondence and you will have total control of your fund. You can have access to the details of your fund online, The rules of the old scheme will still apply but now you control the money.
Pensions are complicated and it is fair to say in some cases it may be more beneficial to leave your money in the old employer fund of the old scheme offers certain benefits. Depending if your pension is a defined benefit of defined contribution, a defined benefit is a promise to provide a pension on a percentage of final salary dependent on years of service and will require advice before considering moving to a BOB, the defined contribution on the other hand is a little more straightforward, basically it contributions and growth from the underlying fund. New defined contribution schemes established on or after 6th of February 2011 must provide ARF option and all existing defined contribution schemes may change their rules without Revenue approval, in relation to defined benefit schemes the area is still a little grey about ARF, but if we are to operate a fair pension system in Ireland both schemes need the same options and I am optimistic or this becoming a reality in the near future.
There are many scenarios and very many rules to navigate. But in summary, if you have changed jobs and left your pension behind, not only can you more than likely save money but regain full control of your money too.