Is your retirement on track?

We are delighted to enclose details of our latest published commentary from the ECJ Business Post on the important issue concerning pension consolidation and how clients can track performance, risk levels and the costs associated with their various pension holdings.

Today, very few of us stay in the same job from starting our first job to the day we retire. The result is that many people will have lots of different pension plans managed by various investment houses in funds that we will find hard to keep track of.

Therefore, combining some or all of your pensions under the one roof could make real financial sense for many of us. Having gathered various pensions over the years, it can often be problematic to locate exactly where your various pension savings are – and this issue is further compounded for those who have lived and worked abroad. These forgotten pension funds can result in people coming to retirement and missing out on pension savings that could make a big difference to their standard of living. It is estimated that up to €500m worth of pensions currently remain unclaimed in Ireland.

One of the most common mistakes people make is believing that tracing a pension from a previous employer is simply not worth the effort. This can often be a costly mistake to make. If you and your employer have paid into a pension for even just a few years, depending on when that pension was started, significant sums may have accrued. You should aim to make all of your pension plans work as hard as possible. Moving to a pension that gives you higher growth could allow you to retire earlier or stick to your original retirement date but with a higher income.

However, a lot depend on the type of pensions that you have. You might well have several different types of pension and careful analysis of each structure is paramount prior to making any firm decisions.

Final Salary Schemes:

Traditionally, the best type of pension structure was the final-salary pension, also known as a defined benefit scheme. This structure pays a defined annual pension based on your salary when you leave your job and your years of service. If you have any past or current contributions in a final-salary pension, it may not be worth moving them, as it will be unlikely for you to be offered a comparable scheme with your new employers.

Always seek independent financial advice before making a decision you are likely to regret.

Defined Contribution Schemes:

If you have various defined contribution schemes, you could consider consolidating all of these past pensions into the one place. Defined contribution pensions rely on employee, and sometimes employer, contributions combined with investment growth to build your pension fund. When you retire, this money can be used to buy your pension. With these schemes you take the risk with the value of your fund – so if the stock market struggles, then so will the value of your pension fund. It is therefore critical that you know exactly how these pensions are performing and if they are going to meet your annual income requirement in retirement.

The potential advantages of this approach are lower management charges and higher investment returns.

Another significant advantage of moving your funds into one pension pot is simply the ability for you and your advisor to monitor fund performance more easily. A consolidated and strategic approach to investment and risk management is key to the success of your pension fund in the long-run.

Guaranteed Annuity Rates:

If you have a guaranteed annuity rate as part of your pension, it might be worth leaving that particular pension where it is. Previously, the annuity rates on offer were much higher than the rates being offered currently. Annuity rates are based on global bond yields, and these yields are at record low levels currently.

Pension Scheme Transfers:

You have the right to transfer any past pension benefits you have into your current pension. You can also convert the value of your former employer’s pension into what’s called a ‘Buy- Out Bond’. This will give you more control over how and where the value of your pension is invested, so that it better reflects your appetite for investment risk and reward.

It is ultimately the responsibility of each individual to keep track of what they are entitled to. A few simple measures taken now may eliminate a lot of additional stress when it comes to your retirement age.

Gerard O’Brien LL.B LL.M CFP® QFA is a Certified Financial Planner and the Owner of Heritage Wealth, a Financial Planning practice based in Main Street, Midleton, Cork.

For more information, contact Gerard at