Leaving your pension with a former employer might seem convenient, but it can often result in missed opportunities and potentially higher costs. Switching to a Personal Retirement Bond (PRB) can offer you access to several innovative funds, superior investment options and greater control over your pension’s growth. This is the message from Elevate Financial Planning, which has offices in Wexford and Sandyford, Dublin 18, and is experienced in helping clients retrieve old pension pots.
“The issue of neglected pension funds is significant in Ireland,” says Conor Farrell, Managing Director, Elevate Financial Planning. “Many individuals have accumulated multiple pensions with significant values from various employments. However, they may not be getting the attention they deserve. These funds often get left behind, potentially underperforming and incurring high fees due to inappropriate investment strategies.”
The good news is that there are solutions to consolidate these funds into a more manageable and potentially profitable pot.
A Personal Retirement Bond (PRB) opens up a world of investment options not typically available in standard employer schemes. Several of the most innovative funds from BlackRock to Vanguard and Fidelity can be incorporated into a PRB portfolio. These funds have not only outperformed standard employer scheme funds during market upswings but have also significantly mitigated losses during downturns.
Additionally, a PRB allows access to a wider range of investment options, including bond ETFs, NASDAQ, and MSCI indices, offering superior mutual funds compared to the limited choices in most employer schemes. For example in 2022, the assets of Irish pension funds decreased by €157 billion, representing a decline of slightly more than 16 per cent overall. Over the last ten years, the cautious fund has averaged just 2.61 per cent and the balanced 4.57 per cent annualised. By contrast, the leading index fund, the S&P 500, has averaged 12.67 per cent during the same period.
To break this down, if you had €100,000 in your pension in the cautious fund ten years ago, it would now be worth €129,262, in the balanced fund €156,340 and with the S&P €324,155. By switching to a PRB, you can ensure that your investments are optimised, providing more stability and growth potential.
While switching to a PRB offers benefits like tax advantages, early access starting at age 50, and the ability to combine multiple pensions, the most crucial advantage is the ability to make the most of your current investments. Elevate Financial Planning assists clients with locating past schemes, assessing performance and providing tailored solutions to regain control of their funds.
If you’re considering a transfer, Farrell recommends gathering information on your employment history and contacting former employers or pension providers to understand the value of your pensions. Most providers will require specific forms to initiate the transfer process, and consulting a financial adviser is essential to ensure the transfer is in your best interest and tax-efficient.
Ultimately, consolidating pensions can reduce administrative fees and open up improved investment opportunities. “Managing one fund is easier and less time-consuming than keeping track of multiple pots,” explains Farrell. “With PRBs, individuals have a broader range of investment options tailored to their risk appetite and retirement goals.”
A PRB also provides an earlier access point for pension schemes – starting at age 50, compared to the standard access age of 60/65 in occupational schemes. This flexibility includes the ability to access a 25 per cent tax-free lump sum at an earlier age.
By taking steps to locate and consolidate these pensions, individuals can significantly enhance their retirement outcomes. Elevate Financial experts are there to guide clients through every step of this process, ensuring their retirement planning is as efficient and beneficial as possible.
For more on Elevate’s pension services, see elevatefinancial.ie.