So you have left your job for another or you have been made redundant and you are not eligible for early retirement. You have been forward on documentation from a company looking after the pension under the heading “Leaving Service Options”. And included in these is the option to transfer to a new Personal Retirement Bond or Buy-Out Bond. There is no difference, bar name, between Retirement Bonds and Buy-Out Bonds.
A Buy-Out / Retirement Bond is a standalone pension contract or bond in which you invest the accumulated personal pension monies with a life company (either the existing company or a new one) in your own name and where you are now responsible for the investment decisions associated with this bond / pension fund.
It should be noted that a retirement bond is transferable and that once issued it can be moved from one life company to another, prior to retirement. Therefore if you are unhappy with the performance or the terms of your bond you can move it to another provider. Please note though that there may be encashment penalties within the first five years of setting up the bond and this should be checked prior to making any switches.
What are the advantages?
- You are in control of the investment and the investment choices
- You can choose from a variety of providers
- There are some very strong deals out there (based on years to retirement) that include increased allocations and low annual management charges
- At any stage in the future you can move this into a company/executive scheme
- You can access to or retire the monies once you have left that employment from the age of 50 on and can then use the proceeds of the Retirement Bond to provide retirement benefits.
Are there any drawbacks?
Like any decision you should be aware of the following:
- There may be an element of risk associated with the investment so seek professional advice
- Whilst there may be enticements to enter a particular deal with a life company i.e. enhanced allocation make sure you know what the early encashment penalties are
For further information on Company Pensions, a review of your existing pension plan or a consultation on new plans please contact us.