Consumer advice with Gráinne McGuinness
My husband is about to change jobs for the second time in eight years. Must we make sure his pension is OK? He had one at his old employer and his most recent job, and will have one at the new job, too. But we’ve never sat down to assess them and don’t know the full value of his pension. Where do we start? We are both mid-forties. I work as a teacher and have been permanent for 12 years, so it’s only his pension we are concerned about. – Catriona McCarthy, Macroom
It is a great idea to take control of your pension savings, and the earlier the better. The good news is that your husband already has a good few years of pension savings. The sooner people start, the better the chances of building a decent fund for retirement.
Judging by your letter, your husband has gone along with whatever pension type and contribution level his employers have suggested. He may be losing out on opportunities to boost his pot. He may also find the money he has accumulated is being managed more or less aggressively than he would like. The first thing to do is gather all the information you can on all the pension payments he has made so far. He can ask the HR department at his current employer for full details of what he has paid with them and what scheme he is with. If he didn’t do anything with the pension from his old employer, he should have been getting at least an annual statement from the trustees, advising him of his preserved benefit in the scheme.
You should then sit down with a financial advisor and assess your current situation. You can go to an independent broker, or ask for a financial review with your bank. They will be able to find out exactly how much you have in the various schemes and outline your options as regards combining them or them keeping separate. When you leave a job, there are a number of possible courses of action with the accumulated pension contributions. These are dependent on the schemes you were in, length of service, and your age — so you will need advice to assess the right move for you. The advisor will also go through several areas to help you decide the correct plan for your future. How long you have to go until retirement, and how much you have accumulated so far, are important factors. But you will also have to think about how much you will need in retirement.
Major expenses, like the mortgage, should be cleared. This will reduce your monthly outgoings. But, against that, you need to consider any plans you have for things like travel.
If you have a family, what age will they be? Children in third-level can be a big drain on resources, and you need to be prepared if you are going to be still funding education after you retire.
Too many of us have a vague idea that we will manage on the state pension, which is currently €222 per week for the contributory pension. If you compare that to your current income, you can see how much extra you will need to get to the lifestyle you would like in retirement.
It is possible that your husband may wish to pay more than he has to date. This is normally done using additional voluntary contributions (AVCs) and an advisor will show you how to do that in the most tax-efficient way.
The advisor should also assess your appetite for risk to decide how aggressively-managed a plan you should choose — possible greater benefits come at the cost of greater risk of losses.
Just because you are a civil servant does not mean you should completely ignore your own pension, particularly if you will not have 40 years service at retirement age.
There may be an option to purchase notional service and boost your final pension.
You can get more details from http://www.cspensions.gov.ie and then discuss with the advisor.
If there are any consumer issues that you’d like Gráinne to address or if you have problems that Gráinne could help with, she can be contacted at firstname.lastname@example.org
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